Question 1

Brenna's income elasticity of demand for football tickets is 1.5.All else equal,if her income increases by 18 percent,how many more football tickets will she buy

Accepted Answer

An income elasticity of demand of 1.5 means that a one percent increase in income leads to a 1.5 percent increase in the quantity of football tickets demanded. Therefore, an 18 percent increase in income leads to a 27 percent increase in the quantity of football tickets demanded (1.5 x 18 = 27).

Question 2

Table 5-2 
-Refer to Table 5-2.Using the midpoint method,what is the income elasticity of good Y

Accepted Answer

The midpoint method calculates elasticity using the average of the starting and ending values. Given the options, -3.33 is the correct income elasticity for good Y using this method.

Question 3

Last month,sellers of good Y took in $150 and sold 50 units of good Y.This month sellers of good Y raised their price,took in $160 and sold 40 units of good Y.At the same time,the price of good X stayed the same,but sales of good X increased from 20 units to 40 units.What can we conclude about goods X and Y

Accepted Answer

The answer of Last month,sellers of good Y took in...

Question 4

Table 5-2 
-Refer to Table 5-2.Which of the following best describes good X

Accepted Answer

Good X has a positive income elasticity, which means that as income increases, the demand for Good X also increases. This is the characteristic of a normal good.

Question 5

Table 5-2 
-Refer to Table 5-2.Which of the following best describes good Y

Accepted Answer

Good Y is described as an inferior good because its demand decreases as consumer income increases, which is characteristic of inferior goods.

Question 6

When her income increased from $30,000 to $40,000,Toby's consumption of macaroni decreased from 8 kilograms to 6 kilograms and her consumption of soy burgers increased from 3 kilograms to 4 kilograms.What can we conclude for Toby

Accepted Answer

The decrease in consumption of macaroni when the income increased suggests that macaroni is an inferior good (negative income elasticity). The increase in consumption of soy burgers suggests that it is a normal good (positive income elasticity). Therefore, the correct option is C, where macaroni is an inferior good with an income elasticity of -1, and soy burgers are normal goods with an income elasticity of 1.

Question 7

Assume that a three percent increase in income results in a four percent decrease in the quantity demanded of a good.What is the income elasticity of demand for the good,and what type of good is it

Accepted Answer

The income elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in income. In this case, we have a negative relationship between income and quantity demanded, which means the income elasticity of demand is negative. As the income increases, the quantity demanded decreases. This indicates that the good is an inferior good.

Question 8

Assume that a six percent increase in income results in a three percent increase in the quantity demanded of a good.What is the income elasticity of demand for the good,and what type of good is it

Accepted Answer

The income elasticity of demand measures the responsiveness of the quantity demanded to changes in income. A positive income elasticity of demand means that as income increases, the quantity demanded of the good also increases, indicating that it is a normal good. Since a six percent increase in income results in a three percent increase in the quantity demanded of the good, the income elasticity of demand is 0.5, which is positive. Therefore, the correct answer is C.

Question 9

In January,the price of widgets was $2.00 and Wendy's Widgets produced 100 widgets.In February,the price of widgets was $2.50 and Wendy's Widgets produced 150 widgets.In March,the price of widgets was $3.00 and Wendy's Widgets produced 200 widgets.What is the price elasticity of supply of Wendy's Widgets

Accepted Answer

The answer of In January,the price of widgets was $2.00...

Question 10

How is cross-price elasticity of demand calculated

Accepted Answer

Cross-price elasticity of demand measures the responsiveness of the quantity demanded of one good to a change in the price of another good. It is calculated by taking the percentage change in quantity demanded of good 1 and dividing it by the percentage change in the price of good 2.

Question 11

What does cross-price elasticity of demand measure

Accepted Answer

Cross-price elasticity of demand measures how the quantity demanded of one good changes as the price of another good changes. It shows the relationship between the demand for one good and the price of another good.

Question 12

What does the price elasticity of supply measure

Accepted Answer

The price elasticity of supply measures the responsiveness of the quantity supplied to changes in the price of the good. It reflects the degree to which producers adjust the quantity supplied in response to changes in price. Option A refers to the elasticity of the supply with respect to input prices, and option C refers to the elasticity of demand. Option D is not directly related to the concept of price elasticity of supply.

Question 13

If you want to know how an increase in the price of ice cream at the Ice Cream Shoppe affects the demand for frozen yogurt in your shop across the street,what would you compute

Accepted Answer

The cross-price elasticity of demand measures the responsiveness of demand for one good to a change in the price of another good. In this case, we want to know how the price change of ice cream (a related good) affects the demand for frozen yogurt. Therefore, we would compute the cross-price elasticity of demand.

Question 14

Which of the following types of goods would have a large income elasticity

Accepted Answer

Luxuries are goods that people can do without or defer purchasing when their income decreases. Conversely, as income increases, the demand for such goods tends to rise sharply. Therefore, luxury goods are highly elastic, meaning their quantity demanded is highly responsive to changes in consumers' incomes.

Question 15

If the cross-price elasticity of demand of two goods is 2.5,what would the two goods be

Accepted Answer

A cross-price elasticity of demand of 2.5 indicates that the two goods are substitutes, meaning that an increase in the price of one good would lead to an increase in demand for the other (and vice versa). Complements would have a negative cross-price elasticity of demand, while luxury and normal goods are not determined by cross-price elasticity alone.

Question 16

Suppose that the cross-price elasticity of demand between hot dogs and mustard is -1.5.If there is a 20 percent increase in the price of hot dogs,what will happen to the quantity of mustard purchased

Accepted Answer

The cross-price elasticity of demand is -1.5, indicating that hot dogs and mustard are complements. A 20% increase in the price of hot dogs will lead to a 30% decrease in the quantity of mustard purchased (20% * -1.5 = -30%).

Question 17

What income elasticities do food and clothing tend to have,and why

Accepted Answer

Food and clothing tend to have small income elasticities because they are considered necessities, and consumers will continue to purchase them regardless of changes in income.

Question 18

If two goods are substitutes,what will their cross-price elasticity of demand be

Accepted Answer

When two goods are substitutes, an increase in the price of one good will cause an increase in the demand for the other good. Hence, their cross-price elasticity of demand will be positive.

Question 19

What can the cross-price elasticity of demand tell us

Accepted Answer

The cross-price elasticity of demand measures the responsiveness of demand for one good to changes in the price of another good. If the cross-price elasticity is positive, it means that the two goods are substitutes (a price increase in one leads to an increase in demand for the other). If the cross-price elasticity is negative, it means that the two goods are complements (a price increase in one leads to a decrease in demand for the other). Therefore, the cross-price elasticity can tell us whether goods are complements or substitutes.

Question 20

If the cross-price elasticity of demand of two goods is negative,what are those two goods called

Accepted Answer

When the cross-price elasticity of demand of two goods is negative, it indicates that the two goods are complements. This means that the demand for one good is directly related to the demand for the other good. For example, the demand for hot dogs is directly related to the demand for hot dog buns. If the price of hot dogs increases, the demand for hot dog buns will decrease, and vice versa.

Quiz 5: Elasticity and Its Application