Question 1

Shawna wins the lottery and her income increases by 60 percent.She used to buy 10 pints of cottage cheese per month and now she buys 12 pints.Her income elasticity of demand for cottage cheese is ________,making it a(n)________ good.

Accepted Answer

Income elasticity of demand (Ey) = percentage change in quantity demanded/percentage change in income
Percentage change in income = 60%
Percentage change in quantity demanded = ((12-10)/10) x 100% = 20%
Ey = 20%/60% = 0.33

Since the elasticity is less than 1, cottage cheese is a necessity good - meaning that demand for it does not increase as much as income increases.

Question 2

When incomes fall by 20 percent,quantity demanded of specialty baked goods falls by 50 percent.Specialty baked goods are

Accepted Answer

Luxuries are goods for which demand increases more than proportionally as income rises, and decreases disproportionately when income falls. The significant drop in quantity demanded (50%) due to a smaller decrease in income (20%) suggests that specialty baked goods are considered luxuries, as people cut back on them significantly when their income decreases.

Question 3

What good is most likely to have an income elasticity of demand equal to 8?

Accepted Answer

A five-star hotel is a luxury item that is highly sensitive to changes in income. When people have more disposable income, they are more likely to splurge on expensive accommodations like those found in a five-star hotel. Therefore, the income elasticity of demand for a five-star hotel is likely to be high, around 8.

Question 4

If the income elasticity of demand is 0.5,the good will be a(n)________ good.

Accepted Answer

When the income elasticity of demand is positive but less than 1 (0 < elasticity < 1), it indicates that the good is a necessity. This means that as income increases, demand for the good increases, but at a slower rate than the increase in income.

Question 5

When Noelle received a promotion at work,her income rose by 50 percent.The income elasticity of demand for steak was found to be 1.5.For her,steak is a(n)

Accepted Answer

Noelle's income rose significantly after her promotion, indicating that steak is likely a luxury good for her. The income elasticity of demand being 1.5 supports this conclusion, as it indicates that Noelle's demand for steak is responsive to changes in income and that she likely purchases more steak as her income increases, which is typical of luxury goods.

Question 6

Howard buys 5 suits a year when he earns $70,000.When his income increases to $200,000,he buys 15 suits a year.From the midpoint method,his income elasticity of demand for suits is

Accepted Answer

Using the midpoint method, we have:

% change in quantity demanded = ((15-5)/10)/((15+5)/2) = 0.8
% change in income = (200,000-70,000)/((200,000+70,000)/2) = 0.9565

Therefore, Howard's income elasticity of demand for suits is:

0.8/0.9565 = 0.836

Since the income elasticity of demand is a measure of how responsive the quantity demanded of a good is to changes in income, we know that Howard's demand for suits is income elastic (since his income elasticity of demand is greater than 1).

However, we must use the closest answer choice, which is 1.04, or A.

Question 7

If the percentage change in the quantity consumed of pizza is 8 percent and the percentage change in income is 2 percent,what is the income elasticity of demand for pizza?

Accepted Answer

The answer of If the percentage change in the quantity...

Question 8

When Ruben starts working at his first full-time job out of college with a $60,000 salary,he is likely to buy more ________ and less ________.

Accepted Answer

With a higher income, Ruben is likely to increase his consumption of higher-quality, more expensive goods (like sushi) and decrease his consumption of lower-quality, cheaper goods (like canned tuna), reflecting a normal good consumption pattern.

Question 9

Used car dealers find that their sales rise in a recession.We can be certain that consumers view used cars as

Accepted Answer

The answer of Used car dealers find that their sales...

Question 10

What good is most likely to have an income elasticity of demand equal to 0.3?

Accepted Answer

Medication is an essential commodity and its demand is less sensitive to changes in income. Therefore, it is most likely to have an income elasticity of demand equal to 0.3, which indicates that a 1% increase in income will result in a 0.3% increase in demand for medication.

Question 11

If the income elasticity of demand for noodles is -2 and the percentage change in the quantity consumed is 5 percent,what is the percentage change in income?

Accepted Answer

The answer of If the income elasticity of demand for...

Question 12

What good is most likely to have a negative income elasticity of demand?

Accepted Answer

Instant noodles are a relatively cheap and basic food item, so as income rises, people are likely to switch to higher-quality or more expensive food items, leading to a decrease in demand for instant noodles. A negative income elasticity of demand means that as income rises, demand for the good decreases. Therefore, E is the best answer.

Question 13

A firm knows that Seneca's income elasticity of demand for hair ties is 5; for Janelle,it is 0.2.A firm can reason that a hair tie is a(n)________ good for Seneca while it is a(n)________ good for Janelle.

Accepted Answer

Income elasticity of demand measures how the quantity demanded of a good responds to a change in income. A good with an income elasticity greater than 1, like in Seneca's case (5), is considered a luxury good because demand increases more than proportionally as income increases. A good with an income elasticity between 0 and 1, like in Janelle's case (0.2), is considered a necessity because demand increases with income but less than proportionally.

Question 14

If the income elasticity of demand for good smartphone apps is 5 and the percentage change in income is 10 percent,what is the percentage change in the quantity consumed?

Accepted Answer

The percentage change in quantity consumed is calculated by multiplying the income elasticity of demand (5) by the percentage change in income (10%), resulting in a 50% change.

Question 15

Refer to the information in the accompanying table.Without any calculations,we know that sushi is a(n)

Accepted Answer

Sushi has a positive income elasticity of demand, meaning that as income increases, demand for sushi also increases. This is characteristic of a normal good.

Question 16

When her income increases from $10,000 to $20,000,as shown in the accompanying table,Juanita increases the quantity demanded from 3 to 7 rolls at a price of $3.From the midpoint method,income elasticity of demand for sushi is

Accepted Answer

The answer of When her income increases from $10,000 to...

Question 17

When her income falls from $50,000 to $20,000,Arianna increases her monthly purchase of hamburger from 20 pounds to 35 pounds.From the midpoint method,Arianna's income elasticity of demand for hamburgers is

Accepted Answer

The answer of When her income falls from $50,000 to...

Question 18

A shopping mall owner is given a list of income elasticity of demand values.Which one represents a necessity?

Accepted Answer

A necessity good has an income elasticity of demand between 0 and 1, indicating that demand increases with income but at a slower rate.

Question 19

If the income elasticity of demand for laptops is 3.5,you know that laptops are a(n)________ good.

Accepted Answer

A high income elasticity of demand (greater than 1) indicates that the good is a luxury item. Therefore, laptops are a luxury good.

Question 20

If the income elasticity of demand is-3,the good will be a(n)________ good.

Accepted Answer

The answer of If the income elasticity of demand is-3,the...

Quiz 4: Elasticity

Shawna wins the lottery and her income increases by 60 percent.She used to buy 10 pints of cottage cheese per month and now she buys 12 pints.Her income elasticity of demand for cottage cheese is ,making it a(n) good.

When incomes fall by 20 percent,quantity demanded of specialty baked goods falls by 50 percent.Specialty baked goods are

What good is most likely to have an income elasticity of demand equal to 8?

If the income elasticity of demand is 0.5,the good will be a(n) ________ good.

When Noelle received a promotion at work,her income rose by 50 percent.The income elasticity of demand for steak was found to be 1.5.For her,steak is a(n)

Howard buys 5 suits a year when he earns $70,000.When his income increases to $200,000,he buys 15 suits a year.From the midpoint method,his income elasticity of demand for suits is

If the percentage change in the quantity consumed of pizza is 8 percent and the percentage change in income is 2 percent,what is the income elasticity of demand for pizza?

When Ruben starts working at his first full-time job out of college with a $60,000 salary,he is likely to buy more and less .

Used car dealers find that their sales rise in a recession.We can be certain that consumers view used cars as

What good is most likely to have an income elasticity of demand equal to 0.3?

If the income elasticity of demand for noodles is -2 and the percentage change in the quantity consumed is 5 percent,what is the percentage change in income?

What good is most likely to have a negative income elasticity of demand?

A firm knows that Seneca's income elasticity of demand for hair ties is 5; for Janelle,it is 0.2.A firm can reason that a hair tie is a(n) good for Seneca while it is a(n) good for Janelle.

If the income elasticity of demand for good smartphone apps is 5 and the percentage change in income is 10 percent,what is the percentage change in the quantity consumed?

Refer to the information in the accompanying table.Without any calculations,we know that sushi is a(n)

When her income increases from $10,000 to $20,000,as shown in the accompanying table,Juanita increases the quantity demanded from 3 to 7 rolls at a price of $3.From the midpoint method,income elasticity of demand for sushi is

When her income falls from $50,000 to $20,000,Arianna increases her monthly purchase of hamburger from 20 pounds to 35 pounds.From the midpoint method,Arianna's income elasticity of demand for hamburgers is

A shopping mall owner is given a list of income elasticity of demand values.Which one represents a necessity?

If the income elasticity of demand for laptops is 3.5,you know that laptops are a(n) ________ good.

If the income elasticity of demand is-3,the good will be a(n) ________ good.

Quiz 4: Elasticity

Shawna wins the lottery and her income increases by 60 percent.She used to buy 10 pints of cottage cheese per month and now she buys 12 pints.Her income elasticity of demand for cottage cheese is ________,making it a(n) ________ good.

When incomes fall by 20 percent,quantity demanded of specialty baked goods falls by 50 percent.Specialty baked goods are

What good is most likely to have an income elasticity of demand equal to 8?

If the income elasticity of demand is 0.5,the good will be a(n) ________ good.

When Noelle received a promotion at work,her income rose by 50 percent.The income elasticity of demand for steak was found to be 1.5.For her,steak is a(n)

Howard buys 5 suits a year when he earns $70,000.When his income increases to $200,000,he buys 15 suits a year.From the midpoint method,his income elasticity of demand for suits is

If the percentage change in the quantity consumed of pizza is 8 percent and the percentage change in income is 2 percent,what is the income elasticity of demand for pizza?

When Ruben starts working at his first full-time job out of college with a $60,000 salary,he is likely to buy more ________ and less ________.

Used car dealers find that their sales rise in a recession.We can be certain that consumers view used cars as

What good is most likely to have an income elasticity of demand equal to 0.3?

If the income elasticity of demand for noodles is -2 and the percentage change in the quantity consumed is 5 percent,what is the percentage change in income?

What good is most likely to have a negative income elasticity of demand?

A firm knows that Seneca's income elasticity of demand for hair ties is 5; for Janelle,it is 0.2.A firm can reason that a hair tie is a(n) ________ good for Seneca while it is a(n) ________ good for Janelle.

If the income elasticity of demand for good smartphone apps is 5 and the percentage change in income is 10 percent,what is the percentage change in the quantity consumed?

Refer to the information in the accompanying table.Without any calculations,we know that sushi is a(n)

When her income increases from $10,000 to $20,000,as shown in the accompanying table,Juanita increases the quantity demanded from 3 to 7 rolls at a price of $3.From the midpoint method,income elasticity of demand for sushi is

When her income falls from $50,000 to $20,000,Arianna increases her monthly purchase of hamburger from 20 pounds to 35 pounds.From the midpoint method,Arianna's income elasticity of demand for hamburgers is

A shopping mall owner is given a list of income elasticity of demand values.Which one represents a necessity?

If the income elasticity of demand for laptops is 3.5,you know that laptops are a(n) ________ good.

If the income elasticity of demand is-3,the good will be a(n) ________ good.

Shawna wins the lottery and her income increases by 60 percent.She used to buy 10 pints of cottage cheese per month and now she buys 12 pints.Her income elasticity of demand for cottage cheese is ,making it a(n) good.

When Ruben starts working at his first full-time job out of college with a $60,000 salary,he is likely to buy more and less .

A firm knows that Seneca's income elasticity of demand for hair ties is 5; for Janelle,it is 0.2.A firm can reason that a hair tie is a(n) good for Seneca while it is a(n) good for Janelle.