Question 1

Danita rescues dogs from her local animal shelter. When Danita's income rises by 7 percent, her quantity demanded of dog biscuits increases by 12 percent. For Danita, the income elasticity of demand for dog biscuits is
A) negative, and dog biscuits are a normal good.
B) negative, and dog biscuits are an inferior good.
C) positive, and dog biscuits are an inferior good.
D) positive, and dog biscuits are a normal good.

Accepted Answer

When Danita's income rises by 7%, her quantity demanded of dog biscuits increases by 12%. This indicates that dog biscuits are a normal good for her. The income elasticity of demand is positive, as an increase in income leads to an increase in quantity demanded. Therefore, choices B and C (which suggest that dog biscuits are inferior goods) can be eliminated. Option A suggests a negative income elasticity of demand, which is not the case here. Hence, the correct answer is D.

Question 2

Table 5-7
The following table shows a portion of the demand schedule for a particular good at various levels of income.
 
-Refer to Table 5-7. Using the midpoint method, at a price of $12, what is the income elasticity of demand when income rises from $5,000 to $10,000?
A) 0.00
B) 0.41
C) 1.00
D) 2.45

Accepted Answer

The answer of Table 5-7
The following table shows a portion...

Question 3

Last year, Tess bought 5 handbags when her income was $54,000. This year, her income is $60,000, and she purchased 7 handbags. Holding other factors constant, it follows that Tess's income elasticity of demand is about
A) 0.32, and Tess regards handbags as inferior goods.
B) 0.32, and Tess regards handbags as normal goods.
C) 3.17, and Tess regards handbags as inferior goods.
D) 3.17, and Tess regards handbags as normal goods.

Accepted Answer

To calculate the income elasticity of demand, we use the formula:

Income Elasticity of Demand = % Change in Quantity Demanded / % Change in Income

First, let's calculate the % change in quantity demanded:

% Change in Quantity Demanded = [(New Quantity Demanded - Old Quantity Demanded) / Old Quantity Demanded] x 100

% Change in Quantity Demanded = [(7-5)/5] x 100
% Change in Quantity Demanded = 40%

Next, let's calculate the % change in income:

% Change in Income = [(New Income - Old Income) / Old Income] x 100

% Change in Income = [(60,000 - 54,000) / 54,000] x 100
% Change in Income = 11.11%

Now we can calculate the income elasticity of demand:

Income Elasticity of Demand = 40% / 11.11%

Income Elasticity of Demand = 3.6

Since the income elasticity of demand is greater than 1, we know that the good is a normal good. Therefore, the correct answer is D: 3.17 and Tess regards handbags as normal goods.

Question 4

Suppose the income elasticity of demand is -0.5 for good X. This implies that a 5% decrease in income will cause the quantity demanded of good X to
A) increase by 2.5%, and X is an inferior good.
B) decrease by 2.5% and X is a normal good.
C) increase by 10% and X is an inferior good.
D) decrease by 10% and X is a normal good.

Accepted Answer

The answer of Suppose the income elasticity of demand is...

Question 5

Table 5-8
 
-Refer to Table 5-8. Using the midpoint method, the income elasticity of demand for good Y is
A) 2.33, and good Y is a normal good.
B) -2.33, and good Y is an inferior good.
C) -0.43, and good Y is a normal good.
D) -0.43, and good Y is an inferior good.

Accepted Answer

The answer of Table 5-8
 
-Refer to Table 5-8. Using...

Question 6

Table 5-8
 
-Refer to Table 5-8. Using the midpoint method, what is the income elasticity of demand for good X?
A) -3.5
B) 0.29
C) -0.29
D) 3.5

Accepted Answer

The answer of Table 5-8
 
-Refer to Table 5-8. Using...

Question 7

Assume that a 4 percent decrease in income results in a 6 percent increase in the quantity demanded of a good. The income elasticity of demand for the good is
A) negative, and the good is an inferior good.
B) negative, and the good is a normal good.
C) positive, and the good is an inferior good.
D) positive, and the good is a normal good.

Accepted Answer

The answer of Assume that a 4 percent decrease in...

Question 8

Last year, Jim bought 8 tickets to sporting events when his income was $30,000. This year, his income is $33,000, and he purchased 10 tickets to sporting events. Holding other factors constant and using the midpoint method, it follows that Jim's income elasticity of demand is about
A) 0.43, and Jim regards tickets to sporting events as inferior goods.
B) 0.43, and Jim regards tickets to sporting events as normal goods.
C) 2.33, and Jim regards tickets to sporting events as inferior goods.
D) 2.33, and Jim regards tickets to sporting events as normal goods.

Accepted Answer

The answer of Last year, Jim bought 8 tickets to...

Question 9

Assume that a 4 percent increase in income results in a 2 percent increase in the quantity demanded of a good. The income elasticity of demand for the good is
A) negative, and the good is an inferior good.
B) negative, and the good is a normal good.
C) positive, and the good is a normal good.
D) positive, and the good is an inferior good.

Accepted Answer

A 4% increase in income results in a 2% increase in the quantity demanded of a good, which means the income elasticity of demand is positive. Since the income elasticity of demand is less than 1, the good is a normal good, meaning that as income increases, the demand for the good also increases, but at a slower rate than income. Therefore, answer choice C is correct. Answers A, B, and D are incorrect because they assume the good is either negative in income elasticity (A and B) or inferior (D), which is not supported by the information given.

Question 10

You and your college roommate eat three packages of Ramen noodles each week. After graduation last month, both of you were hired at several times your college income. You still enjoy Ramen noodles very much and buy even more, but your roommate plans to buy fewer Ramen noodles in favor of foods she prefers more. When looking at income elasticity of demand for Ramen noodles, yours would
A) be negative, and your roommate's would be positive.
B) be positive, and your roommate's would be negative.
C) be zero, and your roommate's would approach infinity.
D) approach infinity, and your roommate's would be zero.

Accepted Answer

Income elasticity of demand measures the change in demand for a good in response to a change in income. If your demand for Ramen noodles increases as your income increases, your income elasticity of demand is positive. On the other hand, if your roommate's demand for Ramen noodles decreases as her income increases, her income elasticity of demand is negative. Therefore, option B is correct where your income elasticity of demand for Ramen noodles would be positive, and your roommate's would be negative.

Question 11

Table 5-7
The following table shows a portion of the demand schedule for a particular good at various levels of income.
 
-Refer to Table 5-7. Using the midpoint method, when income equals $7,500, what is the price elasticity of demand between $16 and $20?
A) 0.56
B) 0.75
C) 1.33
D) 1.80

Accepted Answer

The answer of Table 5-7
The following table shows a portion...

Question 12

Last year, Max bought 6 pairs of athletic shoes when his income was $35,000. This year, his income is $42,000, and he purchased 8 pairs of athletic shoes. Holding other factors constant, it follows that Max
A) considers athletic shoes to be necessities.
B) considers athletic shoes to be inferior goods.
C) considers athletic shoes to be normal goods.
D) has a low price elasticity of demand for athletic shoes.

Accepted Answer

Max's increase in purchasing more athletic shoes with his increased income suggests that athletic shoes are a normal good, meaning as his income increases, his demand for athletic shoes also increases. Therefore, option C is the correct answer. Option A cannot be inferred from the given information, and option B is incorrect since as income increases, demand for inferior goods decrease. Option D does not provide enough information to make a conclusion about price elasticity of demand.

Question 13

Table 5-7
The following table shows a portion of the demand schedule for a particular good at various levels of income.
 
-Refer to Table 5-7. Using the midpoint method, when income equals $5,000, what is the price elasticity of demand between $8 and $12?
A) 0.56
B) 0.75
C) 1.33
D) 1.80

Accepted Answer

The answer of Table 5-7
The following table shows a portion...

Question 14

While in college, John and Bethany each buy five packages of mac-n-cheese per week. After they graduate and have full-time jobs, John buys six packages per week, but Bethany buys only two packages per week. When looking at income elasticity of demand for mac­n­cheese, John's
A) is negative, and Bethany's is positive.
B) is positive, and Bethany's is negative.
C) is zero, and Bethany's approaches infinity.
D) approaches infinity, and Bethany's is zero.

Accepted Answer

Income elasticity of demand measures the responsiveness of quantity demanded to a change in income. If the quantity demanded of a good increases as income increases, then the income elasticity of demand is positive. If the quantity demanded of a good decreases as income increases, then the income elasticity of demand is negative. In this case, John buys more mac-n-cheese per week after he graduates and has a full-time job, indicating a positive income elasticity of demand. On the other hand, Bethany buys fewer packages of mac-n-cheese with a higher income, indicating a negative income elasticity of demand. Therefore, the correct answer is B.

Question 15

While in college, Marty and Laura each buy 15 bus tickets per month. After they graduate and have full-time jobs, Marty buys 0 bus tickets per month and Laura buys 28 bus tickets per month. Comparing income elasticity of demand for bus tickets, Marty's
A) is negative, and Laura's is positive.
B) is positive, and Laura's is negative.
C) is zero, and Laura's is positive.
D) is zero, and Laura's is negative.

Accepted Answer

Marty's income elasticity of demand for bus tickets is negative because he buys fewer bus tickets when his income increases. Laura's income elasticity of demand for bus tickets is positive because she buys more bus tickets when her income increases.

Question 16

Table 5-7
The following table shows a portion of the demand schedule for a particular good at various levels of income.
 
-Refer to Table 5-7. Using the midpoint method, at a price of $16, what is the income elasticity of demand when income rises from $5,000 to $10,000?
A) 0.00
B) 0.50
C) 1.00
D) 1.50

Accepted Answer

The answer of Table 5-7
The following table shows a portion...

Question 17

You and your college roommate eat three packages of Ramen noodles each week. After graduation last month, both of you were hired at several times your college income. Your roommate still enjoys Ramen noodles very much and buys even more, but you plan to buy fewer Ramen noodles in favor of foods you prefer more. When looking at income elasticity of demand for Ramen noodles, yours would
A) be negative and your roommate's would be positive.
B) be positive and your roommate's would be negative.
C) be zero and your roommate's would approach infinity.
D) approach infinity and your roommate's would be zero.

Accepted Answer

The answer of You and your college roommate eat three...

Question 18

The income elasticity of demand for caviar tends to be
A) high because caviar is relatively expensive.
B) low because caviar is packaged in small containers.
C) high because buyers generally feel that they can do without it.
D) low because it is almost always in short supply.

Accepted Answer

The answer of The income elasticity of demand for caviar...

Question 19

Table 5-7
The following table shows a portion of the demand schedule for a particular good at various levels of income.
 
-Refer to Table 5-7. Using the midpoint method, at a price of $8, what is the income elasticity of demand when income rises from $7,500 to $10,000?
A) 0.00
B) 0.41
C) 1.00
D) 2.45

Accepted Answer

The answer of Table 5-7
The following table shows a portion...

Question 20

Last year, Joan bought 50 pounds of hamburger when her household's income was $40,000. This year, her household income was only $30,000 and Joan bought 60 pounds of hamburger. All else constant, Joan's income elasticity of demand for hamburger is
A) positive, so Joan considers hamburger to be an inferior good.
B) positive, so Joan considers hamburger to be a normal good and a necessity.
C) negative, so Joan considers hamburger to be an inferior good.
D) negative, so Joan considers hamburger to be a normal good but not a necessity.

Accepted Answer

Joan bought more hamburger despite a decrease in her income, indicating that hamburger is an inferior good for her. Therefore, the income elasticity of demand for hamburger is negative.

Quiz 5: Elasticity and Its Application

Danita rescues dogs from her local animal shelter. When Danita's income rises by 7 percent, her quantity demanded of dog biscuits increases by 12 percent. For Danita, the income elasticity of demand for dog biscuits is

Table 5-7 The following table shows a portion of the demand schedule for a particular good at various levels of income. -Refer to Table 5-7. Using the midpoint method, at a price of $12, what is the income elasticity of demand when income rises from $5,000 to $10,000?

Last year, Tess bought 5 handbags when her income was $54,000. This year, her income is $60,000, and she purchased 7 handbags. Holding other factors constant, it follows that Tess's income elasticity of demand is about

Suppose the income elasticity of demand is -0.5 for good X. This implies that a 5% decrease in income will cause the quantity demanded of good X to

Table 5-8 -Refer to Table 5-8. Using the midpoint method, the income elasticity of demand for good Y is

Table 5-8 -Refer to Table 5-8. Using the midpoint method, what is the income elasticity of demand for good X?

Assume that a 4 percent decrease in income results in a 6 percent increase in the quantity demanded of a good. The income elasticity of demand for the good is

Last year, Jim bought 8 tickets to sporting events when his income was $30,000. This year, his income is $33,000, and he purchased 10 tickets to sporting events. Holding other factors constant and using the midpoint method, it follows that Jim's income elasticity of demand is about

Assume that a 4 percent increase in income results in a 2 percent increase in the quantity demanded of a good. The income elasticity of demand for the good is

Table 5-7 The following table shows a portion of the demand schedule for a particular good at various levels of income. -Refer to Table 5-7. Using the midpoint method, when income equals $7,500, what is the price elasticity of demand between $16 and $20?

Last year, Max bought 6 pairs of athletic shoes when his income was $35,000. This year, his income is $42,000, and he purchased 8 pairs of athletic shoes. Holding other factors constant, it follows that Max

Table 5-7 The following table shows a portion of the demand schedule for a particular good at various levels of income. -Refer to Table 5-7. Using the midpoint method, when income equals $5,000, what is the price elasticity of demand between $8 and $12?

While in college, John and Bethany each buy five packages of mac-n-cheese per week. After they graduate and have full-time jobs, John buys six packages per week, but Bethany buys only two packages per week. When looking at income elasticity of demand for macncheese, John's

While in college, Marty and Laura each buy 15 bus tickets per month. After they graduate and have full-time jobs, Marty buys 0 bus tickets per month and Laura buys 28 bus tickets per month. Comparing income elasticity of demand for bus tickets, Marty's

Table 5-7 The following table shows a portion of the demand schedule for a particular good at various levels of income. -Refer to Table 5-7. Using the midpoint method, at a price of $16, what is the income elasticity of demand when income rises from $5,000 to $10,000?

The income elasticity of demand for caviar tends to be

Table 5-7 The following table shows a portion of the demand schedule for a particular good at various levels of income. -Refer to Table 5-7. Using the midpoint method, at a price of $8, what is the income elasticity of demand when income rises from $7,500 to $10,000?

Last year, Joan bought 50 pounds of hamburger when her household's income was $40,000. This year, her household income was only $30,000 and Joan bought 60 pounds of hamburger. All else constant, Joan's income elasticity of demand for hamburger is

Quiz 5: Elasticity and Its Application

Danita rescues dogs from her local animal shelter. When Danita's income rises by 7 percent, her quantity demanded of dog biscuits increases by 12 percent. For Danita, the income elasticity of demand for dog biscuits is

Table 5-7 The following table shows a portion of the demand schedule for a particular good at various levels of income. -Refer to Table 5-7. Using the midpoint method, at a price of $12, what is the income elasticity of demand when income rises from $5,000 to $10,000?

Last year, Tess bought 5 handbags when her income was $54,000. This year, her income is $60,000, and she purchased 7 handbags. Holding other factors constant, it follows that Tess's income elasticity of demand is about

Suppose the income elasticity of demand is -0.5 for good X. This implies that a 5% decrease in income will cause the quantity demanded of good X to

Table 5-8 -Refer to Table 5-8. Using the midpoint method, the income elasticity of demand for good Y is

Table 5-8 -Refer to Table 5-8. Using the midpoint method, what is the income elasticity of demand for good X?

Assume that a 4 percent decrease in income results in a 6 percent increase in the quantity demanded of a good. The income elasticity of demand for the good is

Last year, Jim bought 8 tickets to sporting events when his income was $30,000. This year, his income is $33,000, and he purchased 10 tickets to sporting events. Holding other factors constant and using the midpoint method, it follows that Jim's income elasticity of demand is about

Assume that a 4 percent increase in income results in a 2 percent increase in the quantity demanded of a good. The income elasticity of demand for the good is

Table 5-7 The following table shows a portion of the demand schedule for a particular good at various levels of income. -Refer to Table 5-7. Using the midpoint method, when income equals $7,500, what is the price elasticity of demand between $16 and $20?

Last year, Max bought 6 pairs of athletic shoes when his income was $35,000. This year, his income is $42,000, and he purchased 8 pairs of athletic shoes. Holding other factors constant, it follows that Max

Table 5-7 The following table shows a portion of the demand schedule for a particular good at various levels of income. -Refer to Table 5-7. Using the midpoint method, when income equals $5,000, what is the price elasticity of demand between $8 and $12?

While in college, John and Bethany each buy five packages of mac-n-cheese per week. After they graduate and have full-time jobs, John buys six packages per week, but Bethany buys only two packages per week. When looking at income elasticity of demand for mac­n­cheese, John's

While in college, Marty and Laura each buy 15 bus tickets per month. After they graduate and have full-time jobs, Marty buys 0 bus tickets per month and Laura buys 28 bus tickets per month. Comparing income elasticity of demand for bus tickets, Marty's

Table 5-7 The following table shows a portion of the demand schedule for a particular good at various levels of income. -Refer to Table 5-7. Using the midpoint method, at a price of $16, what is the income elasticity of demand when income rises from $5,000 to $10,000?

The income elasticity of demand for caviar tends to be

Table 5-7 The following table shows a portion of the demand schedule for a particular good at various levels of income. -Refer to Table 5-7. Using the midpoint method, at a price of $8, what is the income elasticity of demand when income rises from $7,500 to $10,000?

Last year, Joan bought 50 pounds of hamburger when her household's income was $40,000. This year, her household income was only $30,000 and Joan bought 60 pounds of hamburger. All else constant, Joan's income elasticity of demand for hamburger is

While in college, John and Bethany each buy five packages of mac-n-cheese per week. After they graduate and have full-time jobs, John buys six packages per week, but Bethany buys only two packages per week. When looking at income elasticity of demand for macncheese, John's