Normal Goods

1. Because her rent went up, Bonnie must spend less on other items. Which of the following types of goods will Bonnie consume less of?

a. substitutes

b. normal goods

c. inferior goods

d. complements

2. What do sellers do if they expect the prices of their goods to increase dramatically in the near future?

a. sell the goods now and try to invest the money instead of resupplying

b. sell the goods now but try to get the higher price for them

c. store the goods until the price rises

d. store the goods indefinitely regardless of when the price rises

3. Why do fads often lead to shortages, at least in the short term?

a. Buyers and sellers are unable to agree on a price for the good.

b. Laws prevent stores from responding to excess demand in time to prevent a shortage.

c. Manufacturers charge such high prices for the goods that stores are unwilling to pay.

d. Demand increases too quickly and unexpectedly for the supply to keep up.

4. Jean needs a certain medicine. Even though the price for the medicine suddenly goes up 200%, Jean continues to buy it. Why is Jean’s demand for this medicine inelastic?

a. Its elasticity is exactly equal to 1.

b. It requires a small percentage of Jean’s income.

c. The product is a luxury.

d. There are few or no substitutes.

5. Elena is looking for an apartment. Which of the following is an example of her search costs?

a. Elena must pay the first and last months’ rent before she can move into a new apartment.

b. Elena pays movers $400 to help her transfer her belongings to the new apartment.

c. Elena misses two days of work at the supermarket to visit several different apartments available for rent.

d. Elena pays $300 to stay at a hotel for four nights before the apartment is ready.

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