Question

chapter 4 mastery test a, continued
part c match the words in column 1 with their meanings in column 2.
write the letter on the line.
column 1

1. bottom line
2. change in population
3. change in income
4. luxuries
5. change in weather
6. change in consumer taste
7. utility
8. demand schedule

column 2
a. people are very satisfied with a product
b. elasticity of demand is greatest with these goods
c. how much profit a business makes
d. in hot weather, consumers eat more ice cream
e. people start to buy khakis instead of jeans
f. mores stores open when people move to town
g. a chart showing prices and units demanded at each price
h. people may buy more luxuries than in the past
part d write the answers to these questions. use complete sentences.

1. how does diminishing marginal utility affect demand?
2. name a product for which demand is inelastic. explain why

it is inelastic.

1. name a product for which demand is elastic. explain why it is elastic.
2. according to the law of demand, what happens when the price of a

good goes up?

Explanation:

• 14. bottom line: In business, the bottom line refers to the profit a business makes. So it matches with c.
• 15. change in population: When population changes (e.g., more people move to a town), more stores open. So it matches with f.
• 16. change in income: When income changes, people may buy more luxuries (if income increases). So it matches with h.
• 17. luxuries: Elasticity of demand is greatest for luxuries. So it matches with b.
• 18. change in weather: In hot weather, consumers eat more ice - cream. So it matches with d.
• 19. change in consumer taste: When consumer taste changes, people may start to buy different products (e.g., khakis instead of jeans). So it matches with e.
• 20. utility: Utility is related to how satisfied people are with a product. So it matches with a.
• 21. demand schedule: A demand schedule is a chart showing prices and units demanded at each price. So it matches with g.

• 22. Diminishing marginal utility: As a consumer consumes more of a good, the additional satisfaction (marginal utility) from each additional unit decreases. So, consumers are willing to pay less for each additional unit, which affects the demand curve (it slopes downward).
• 23. Inelastic product (e.g., gasoline): People need gasoline for their cars (a necessity for many with no immediate substitutes). So, even if the price changes, the quantity demanded doesn't change much.
• 24. Elastic product (e.g., restaurant meals): There are many substitutes (cooking at home, other restaurants). So, if the price of restaurant meals increases, people can easily reduce their consumption.
• 25. Law of demand: According to the law of demand, when the price of a good goes up, the quantity demanded of that good goes down (assuming other factors remain constant).

Answer:

1. c
2. f
3. h
4. b
5. d
6. e
7. a
8. g

1. As a consumer consumes more of a good, the marginal utility (additional satisfaction) from each additional unit decreases. So, consumers are willing to pay less for each additional unit, causing the demand curve to slope downward.

1. Gasoline is inelastic. People need gasoline for their cars (a necessity for many with no immediate substitutes), so quantity demanded doesn't change much with price changes.

1. Restaurant meals are elastic. There are many substitutes (cooking at home, other restaurants), so if the price of restaurant meals increases, people can easily reduce their consumption.

1. When the price of a good goes up, the quantity demanded of that good goes down (assuming other factors remain constant).