Question 1

If a good is very inexpensive, but it is a necessity, you would predict that demand for the good is:
A.is price-elastic.
B.is price-inelastic.
C.is price unit-elastic.
D.has indeterminable price elasticity.

Accepted Answer

The answer of If a good is very inexpensive, but...

Question 2

A good is likely to have an inelastic demand curve if:
A.the consumer has significant time to respond to the price change.
B.the good has few available substitutes.
C.the good is a luxury.
D.the good accounts for a large share of consumer income.

Accepted Answer

The answer of A good is likely to have an...

Question 3

Suppose the cross-price elasticity of demand for butter and margarine is equal to 0.96 but the cross price elasticity for water and lemons is -0.13.This means that butter and margarine are
________ while water and lemons are _.
A.complements; substitutes
B.substitutes; complements
C.inelastic goods; elastic goods
D.elastic goods; complements

Accepted Answer

Butter and margarine, with a positive cross-price elasticity of 0.96, are substitutes because as the price of one increases, the demand for the other increases. Water and lemons, with a negative cross-price elasticity of -0.13, are complements because as the price of one increases, the demand for the other decreases.

Question 4

The pair of items that is most likely to have a negative cross-price elasticity of demand is:
A)aspirin and hamburgers.
B)hot dogs and mustard.
C)margarine and butter.
D)ketchup and coffee.

Accepted Answer

The answer of The pair of items that is most...

Question 5

For which of the following is the cross-price elasticity of demand most likely a large positive number?
A.hockey pucks and hockey
B.sticks DVDs and milk
C.french fries and onion rings
D.all of these, because the cross-price elasticity is always a positive number

Accepted Answer

The answer of For which of the following is the...

Question 6

If the price of chocolate-covered peanuts increases and the demand for strawberry licorice twists increases, this indicates that these two goods are:
A.complementary goods.
B.normal goods.
C.inferior goods.
D.substitute goods.

Accepted Answer

The answer of If the price of chocolate-covered peanuts increases...

Question 7

If two goods are complements, their cross-price elasticity of demand should be:
A.less than 0.
B.equal to 0.
C.positive yet almost equal to 0.
D.greater than 0.

Accepted Answer

The answer of If two goods are complements, their cross-price...

Question 8

Which of the following goods is likely to have the largest price elasticity of demand?
A)a bicycle
B)a mountain bike
C)a Cannondale mountain bike
D)a green Cannondale mountain bike

Accepted Answer

The answer of Which of the following goods is likely...

Question 9

Suppose the price of cereal rose by 25% and the quantity of milk sold decreased by 50%.We know that the:
A.cross-price elasticity between cereal and milk is -2.
B.cross-price elasticity between cereal and milk is -0.5.
C.price elasticity of demand for milk is 2.
D.cross-price elasticity of demand for milk is 2.

Accepted Answer

The answer of Suppose the price of cereal rose by...

Question 10

If two goods are substitutes, their cross-price elasticity of demand should be:
A)less than 0.
B)negative yet almost equal to 0.
C)equal to 0.
D)greater than 0.

Accepted Answer

If two goods are substitutes, an increase in the price of one good will lead to an increase in the demand for the other good. This relationship is reflected in the positive value of the cross-price elasticity of demand. Therefore, the correct answer is D, greater than 0.

Question 11

The pair of items that is likely to have the largest positive cross-price elasticity of demand is:
A.coffee and tea.
B.skis and ski boots.
C.pizza and pepperoni.
D.milk and cookies.

Accepted Answer

The answer of The pair of items that is likely...

Question 12

After you graduate from college, you open a business selling computers.Many other businesses in your city sell similar computers.Based on this information, the price elasticity of demand for the computers that your business sells will be:
A)1.
B)0.
C)highly elastic.
D)highly inelastic.

Accepted Answer

Since there are many other businesses in the city selling similar computers, consumers have a lot of options to choose from. This means that if your business were to raise its prices, customers could easily go to competitor businesses. Therefore, the demand for your computers would likely be highly elastic, or responsive to changes in price.

Question 13

The cross-price elasticity of demand of complementary goods is:
A.less than 0.
B.equal to 0.
C.greater than 0.
D.between 0 and 1.

Accepted Answer

The cross-price elasticity of demand of complementary goods is negative because an increase in the price of one complementary good would lead to a decrease in the demand for the other complementary good. As a result, the cross-price elasticity of demand of complementary goods is always less than 0.

Question 14

In general, we would predict demand for Gala apples to be:
A.price-elastic.
B.price-inelastic.
C.perfectly price-elastic.
D.perfectly price-inelastic.

Accepted Answer

The answer of In general, we would predict demand for...

Question 15

The cross-price elasticity of electricity with respect to the price of natural gas has been estimated as being equal to 0.2.This implies that:
A.natural gas and electricity are both normal goods.
B.electricity and natural gas are complements.
C.electricity and natural gas are substitutes.
D.one of the two goods is inferior and the other is normal, but we need additional information to determine which of them is normal.

Accepted Answer

A positive cross-price elasticity indicates that the goods are substitutes. As the elasticity is low (0.2), the substitution effect is weak, meaning that customers are not highly responsive to changes in the price of natural gas when it comes to their demand for electricity.

Question 16

The price elasticity of demand for a good such as water is likely to be very low because:
A.the price is a small percentage of most budgets.
B.water has some good substitutes.
C.water is considered a luxury.
D.the share of income spent on water is large.

Accepted Answer

Water is a necessity and is essential for survival, which means consumers are likely to continue purchasing water even if there is a price increase. Additionally, the price of water is usually a small percentage of most budgets, further reducing the price elasticity of demand for this good.

Question 17

If the price of chocolate-covered peanuts increases and the demand for strawberry-flavored soft drinks decreases, this indicates that these two goods are:
A.unrelated goods.
B.complementary goods.
C.inferior goods.
D.substitute goods.

Accepted Answer

The answer of If the price of chocolate-covered peanuts increases...

Question 18

The demand for textbooks is price inelastic.Which of the following would explain this?
A.Many alternative textbooks can be used as substitutes.
B.Students have a lot of time to adjust to price changes.
C.Textbook purchases consume a large portion of most students' income.
D.Textbooks are a necessity.

Accepted Answer

The answer of The demand for textbooks is price inelastic.Which...

Question 19

The price elasticity of a good will tend to be larger:
A.the longer the relevant time period.
B.the fewer the number of substitute goods available.
C.if it is a staple or necessity with few substitutes.
D.if the share of income spent on the good is small.

Accepted Answer

The answer of The price elasticity of a good will...

Question 20

Suppose the cross-price elasticity between demand for Burger King burgers and the price of McDonald's burgers is 0.8.If McDonald's increases the price of its burgers by 10%, then:
A.Burger King will sell 10% more burgers.
B.Burger King will sell 8% more burgers.
C.Burger King will sell 8% fewer burgers.
D.We cannot tell what will happen to Burger King, but McDonald's will sell 8% fewer burgers.

Accepted Answer

The answer of Suppose the cross-price elasticity between demand for...

Quiz 6: Elasticity

If a good is very inexpensive, but it is a necessity, you would predict that demand for the good is: A.is price-elastic. B.is price-inelastic. C.is price unit-elastic. D.has indeterminable price elasticity.

A good is likely to have an inelastic demand curve if: A.the consumer has significant time to respond to the price change. B.the good has few available substitutes. C.the good is a luxury. D.the good accounts for a large share of consumer income.

The pair of items that is most likely to have a negative cross-price elasticity of demand is:

For which of the following is the cross-price elasticity of demand most likely a large positive number? A.hockey pucks and hockey B.sticks DVDs and milk C.french fries and onion rings D.all of these, because the cross-price elasticity is always a positive number

If the price of chocolate-covered peanuts increases and the demand for strawberry licorice twists increases, this indicates that these two goods are: A.complementary goods. B.normal goods. C.inferior goods. D.substitute goods.

If two goods are complements, their cross-price elasticity of demand should be: A.less than 0. B.equal to 0. C.positive yet almost equal to 0. D.greater than 0.

Which of the following goods is likely to have the largest price elasticity of demand?

If two goods are substitutes, their cross-price elasticity of demand should be:

The pair of items that is likely to have the largest positive cross-price elasticity of demand is: A.coffee and tea. B.skis and ski boots. C.pizza and pepperoni. D.milk and cookies.

After you graduate from college, you open a business selling computers.Many other businesses in your city sell similar computers.Based on this information, the price elasticity of demand for the computers that your business sells will be:

The cross-price elasticity of demand of complementary goods is: A.less than 0. B.equal to 0. C.greater than 0. D.between 0 and 1.

In general, we would predict demand for Gala apples to be: A.price-elastic. B.price-inelastic. C.perfectly price-elastic. D.perfectly price-inelastic.

The price elasticity of demand for a good such as water is likely to be very low because: A.the price is a small percentage of most budgets. B.water has some good substitutes. C.water is considered a luxury. D.the share of income spent on water is large.

If the price of chocolate-covered peanuts increases and the demand for strawberry-flavored soft drinks decreases, this indicates that these two goods are: A.unrelated goods. B.complementary goods. C.inferior goods. D.substitute goods.

The price elasticity of a good will tend to be larger: A.the longer the relevant time period. B.the fewer the number of substitute goods available. C.if it is a staple or necessity with few substitutes. D.if the share of income spent on the good is small.