Question 1

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 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

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 4

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 5

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 6

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 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. The fact that a 4 percent increase in income results in a 2 percent increase in quantity demanded implies an income elasticity of demand of 0.5, which is positive.

Question 7

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

The income elasticity of demand (Ey) is measured as the percent change in quantity demanded divided by the percent change in income (Ey = %ΔQ/%ΔI). Since Danita's quantity demanded of dog biscuits increases by 12% when her income rises by 7%, the income elasticity of demand is positive. Additionally, since dog biscuits are a typical good that Danita likely purchases more of as her income rises, the good is a normal good. Therefore, the correct answer is D, positive, and dog biscuits are a normal good.

Question 8

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

Income elasticity of demand measures the responsiveness of the quantity of a good demanded to changes in income. If the income elasticity of demand is negative, it means that as income decreases, the quantity demanded of the good increases. This is characteristic of inferior goods, which are cheaper substitutions for more expensive goods. In this case, Joan bought more hamburger in the year when her household income was lower, which confirms that hamburger is an inferior good for her.

Question 9

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 behavior suggests that he considers athletic shoes to be normal goods since he increased the quantity demanded as his income increased. If athletic shoes were inferior goods, he would have reduced his quantity demanded as his income increased. Additionally, if Max had a low price elasticity of demand, he would still buy athletic shoes even if the price increased, which is not indicated in the scenario.

Question 10

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 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, 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 12

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 13

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 14

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 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 as his income increases (due to having a full-time job), he buys 0 bus tickets per month, showing that he has a very low demand for them. Laura's income elasticity of demand for bus tickets is positive because as her income increases (due to having a full-time job), she buys more bus tickets per month (28 instead of 15), showing that she has a higher demand for them.

Question 16

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 17

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 18

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 19

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 how sensitive demand for a good is to changes in income. John's income elasticity of demand is positive because as his income increases, he buys more mac-n-cheese. Bethany's income elasticity of demand is negative because as her income increases, she buys fewer packages of mac-n-cheese.

Question 20

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 indicates how the demand for a good or service changes as consumer income changes. If you are willing to buy even more Ramen noodles after receiving a higher income, your income elasticity of demand for Ramen noodles is positive. On the other hand, if your roommate plans to buy fewer Ramen noodles after receiving a higher income, her income elasticity of demand for Ramen noodles is negative. Therefore, choice B is the correct answer.

Quiz 5: Elasticity and Its Application

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

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?

The income elasticity of demand for caviar tends to be

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

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

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

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

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

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

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?

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

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 5-7 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?

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

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?

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

Quiz 5: Elasticity and Its Application

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

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?

The income elasticity of demand for caviar tends to be

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

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

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

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

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

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

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?

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

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 5-7 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?

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

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?

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, 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