Question 1

Jill earns an income of $2,000 a week and goes out to dinner 4 times a week. If her income increased to $2,100 she would go out to dinner 5 times a week. Jill's income elasticity of demand is

Accepted Answer

The answer of Jill earns an income of $2,000 a...

Question 2

If the price of wireless phone service decreases and the demand for wired phone services decreases, then wired and wireless phone services are

Accepted Answer

When the price of wireless phone service decreases, consumers may substitute wireless for wired phone services, leading to a decrease in demand for wired phone services. Therefore, wired and wireless phone services are substitutes.

Question 3

If one's demand for good X decreases as income rises, the income elasticity of demand for good X is

Accepted Answer

The income elasticity of demand measures the responsiveness of quantity demanded to a change in income. If the demand for good X decreases as income rises, then the income elasticity of demand for X is negative. This indicates that X is an inferior good, as opposed to a normal good, for which demand would increase as income rises.

Question 4

Which of the following goods is likely to have the highest income elasticity?

Accepted Answer

Luxury goods like designer clothing tend to have the highest income elasticity, as they are more responsive to changes in consumer income. As people's incomes rise, they are more likely to splurge on luxury items like designer clothing.

Question 5

The responsiveness of demand to changes in income holding the good's relative price constant is

Accepted Answer

Income elasticity of demand measures the responsiveness of demand to changes in income, holding the good's relative price constant.

Question 6

Income elasticity relates to

Accepted Answer

Income elasticity of demand measures how the quantity demanded of a good responds to a change in consumers' income, leading to a horizontal shift in the demand curve, either to the left or right, depending on whether the good is a normal or inferior good.

Question 7

Income elasticity of demand is defined as

Accepted Answer

Income elasticity of demand measures the responsiveness of quantity demanded to a change in income. It is calculated as the percentage change in quantity demanded divided by the percentage change in income. Therefore, the best choice is C, which is the percentage change in demand divided by the percentage change in income. A, B, and D are incorrect because they do not reflect the correct formula for income elasticity of demand.

Question 8

The income elasticity of demand for all goods taken together must be

Accepted Answer

The income elasticity of demand for all goods taken together must be +1 because as income increases, the proportionate increase in the demand for all goods (considered together) is equal to the proportionate increase in income.

Question 9

A measure of the responsiveness of demand to changes in income, all other things being constant, is

Accepted Answer

Income elasticity of demand measures the percentage change in quantity demanded in response to a percentage change in income, while holding all other factors that affect demand constant.

Question 10

If demand for Tesla automobiles rises in an area where incomes have increased, this tells us that a Tesla is

Accepted Answer

A normal good is a good for which the demand increases as incomes increase. If demand for Teslas increases in an area where incomes have increased, this indicates that Teslas are a normal good.

Question 11

When Mary earned $3,200 per month, she bought 2 concert tickets each month. Now her monthly income is $5,600, and the number of concert tickets she purchases has risen to 3 per month. Mary's income elasticity of demand for concert tickets equals ________ and the tickets are a(n) ________ good for Mary.

Accepted Answer

To calculate the income elasticity of demand, we use the formula: 
Income elasticity of demand = percentage change in quantity demanded / percentage change in income 
First, we need to calculate the percentage change in quantity demanded: 
((3 tickets - 2 tickets) / 2 tickets) x 100% = +50% 
Mary's quantity demanded of concert tickets increased by 50% as her income increased. 
Next, we need to calculate the percentage change in income: 
(($5,600 - $3,200) / $3,200) x 100% = +75% 
Mary's income increased by 75% from $3,200 to $5,600. 
Now we can plug these numbers into the formula: 
Income elasticity of demand = +50% / +75% = +0.67 
Since the income elasticity of demand is positive (+0.67), we know that concert tickets are a normal good for Mary. Looking at the answer choices, the closest option is D, so that is the correct answer.

Question 12

Suppose that the income elasticity of demand for peanut butter is 0.75. Which of the following is TRUE?

Accepted Answer

Income elasticity of demand being positive indicates that peanut butter is a normal good.

Question 13

Income elasticity of demand is defined as

Accepted Answer

Income elasticity of demand measures the responsiveness of quantity demanded to a change in income. Therefore, the formula for income elasticity of demand is the percentage change in quantity demanded divided by the percentage change in income. So, the correct answer is D, which is the percentage change in demand divided by the percentage change in income.

Question 14

If an individual's income rises 4 percent and his clothing purchases increase 5 percent in response, the income elasticity for clothing by the individual is

Accepted Answer

Income elasticity of demand for clothing is given by the formula: 
% change in quantity demanded of clothing / % change in income
Here, % change in income = 4% and % change in quantity demanded of clothing = 5%
So, income elasticity of demand for clothing = 5% / 4% = 1.25
Since the value is positive, we can conclude that clothing is a normal good for this individual.

Question 15

The income elasticity of demand

Accepted Answer

The income elasticity of demand can be positive, negative, or zero. Positive income elasticity means that as income increases, demand for a good or service also increases. Negative income elasticity means that as income increases, demand for a good or service decreases. Zero income elasticity means that a change in income has no effect on demand for a good or service. Therefore, options A, B, and C are incorrect.

Question 16

When Frank's income was $100 per week, 10 units of good A were demanded. Now his income is $150 per week and 12 units of good A are demanded. Using the percentage change formula, the income elasticity of demand for good A equals

Accepted Answer

The income elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in income. The percentage change in quantity demanded is ((12-10)/10)*100 = 20%, and the percentage change in income is ((150-100)/100)*100 = 50%. Therefore, the income elasticity of demand is 20%/50% = 0.40.

Question 17

When Tim earned $65,000 he purchased 10 novels a year. His income has just increased to $68,000 and he plans to purchase 15 novels this year. Tim's income elasticity of demand for novels equals

Accepted Answer

The answer of When Tim earned $65,000 he purchased 10...

Question 18

The income elasticity of demand is

Accepted Answer

The income elasticity of demand measures the responsiveness of quantity demanded to changes in income, and is calculated as the percentage change in quantity demanded divided by the percentage change in income. Therefore, the correct answer is A, which is the percentage change in demand divided by the percentage change in income.

Question 19

The difference between price elasticity of demand and income elasticity of demand is that

Accepted Answer

Price elasticity of demand measures the responsiveness of quantity demanded to a change in price, while income elasticity of demand measures the responsiveness of quantity demanded to a change in income. Income elasticity refers to a shift in the demand curve caused by changes in income, while price elasticity refers to a movement along the demand curve caused by a change in price.

Question 20

Income elasticity of demand reflects

Accepted Answer

Income elasticity of demand measures how the quantity demanded of a good responds to a change in consumers' income, which is exactly what option D describes.

Quiz 19: Demand and Supply Elasticity

Jill earns an income of $2,000 a week and goes out to dinner 4 times a week. If her income increased to $2,100 she would go out to dinner 5 times a week. Jill's income elasticity of demand is

If the price of wireless phone service decreases and the demand for wired phone services decreases, then wired and wireless phone services are

If one's demand for good X decreases as income rises, the income elasticity of demand for good X is

Which of the following goods is likely to have the highest income elasticity?

The responsiveness of demand to changes in income holding the good's relative price constant is

Income elasticity relates to

Income elasticity of demand is defined as

The income elasticity of demand for all goods taken together must be

A measure of the responsiveness of demand to changes in income, all other things being constant, is

If demand for Tesla automobiles rises in an area where incomes have increased, this tells us that a Tesla is

When Mary earned $3,200 per month, she bought 2 concert tickets each month. Now her monthly income is $5,600, and the number of concert tickets she purchases has risen to 3 per month. Mary's income elasticity of demand for concert tickets equals and the tickets are a(n) good for Mary.

Suppose that the income elasticity of demand for peanut butter is 0.75. Which of the following is TRUE?

Income elasticity of demand is defined as

If an individual's income rises 4 percent and his clothing purchases increase 5 percent in response, the income elasticity for clothing by the individual is

The income elasticity of demand

When Frank's income was $100 per week, 10 units of good A were demanded. Now his income is $150 per week and 12 units of good A are demanded. Using the percentage change formula, the income elasticity of demand for good A equals

When Tim earned $65,000 he purchased 10 novels a year. His income has just increased to $68,000 and he plans to purchase 15 novels this year. Tim's income elasticity of demand for novels equals

The income elasticity of demand is

The difference between price elasticity of demand and income elasticity of demand is that

Income elasticity of demand reflects