Question 1

An inferior good is a good whose quantity demanded
A)rises when its price falls.
B)falls when the price of a related good falls.
C)falls when the consumer's total utility rises.
D)rises when the consumer's income falls.

Accepted Answer

An inferior good is a good whose quantity demanded rises when the consumer's income falls. This is because when income falls, the consumer will switch to cheaper alternatives, which leads to an increase in demand of inferior goods.

Question 2

If the income elasticity of a good is positive,we can conclude that the good is
A)an inferior good.
B)a normal good.
C)a luxury good.
D)a necessity.

Accepted Answer

A positive income elasticity of demand indicates that as income increases, the quantity demanded of the good also increases. This is characteristic of normal goods, which are goods for which demand increases as consumer income increases.

Question 3

If a 10 percent increase in income induced a group of consumers to reduce their yearly purchases of potatoes by 5 percent,for these consumers,
A)the income elasticity of potatoes equals approximately 1.05.
B)the income elasticity of potatoes is 0.5.
C)potatoes are a luxury good.
D)potatoes are an inferior good.

Accepted Answer

The decrease in consumption of potatoes after an increase in income indicates that potatoes are an inferior good. This is because as income increases, consumers tend to shift towards consuming more expensive and higher-quality alternatives to potatoes. The income elasticity of demand for inferior goods is negative. In this case, the income elasticity of potatoes is -0.5.

Question 4

A good is classified as inferior if
A)consumers buy less when the price rises.
B)consumers buy less when income rises.
C)consumers buy less when the price falls.
D)consumers buy more when income rises.

Accepted Answer

An inferior good is one where consumers will buy less of it as their income increases. This is in contrast to a normal good, where consumers will buy more of it as their income increases. When the price of a good rises, it will affect the demand for both normal and inferior goods, but only in the case of inferior goods will an increase in income lead to a decrease in demand.

Question 5

Assuming that bus travel is an inferior good,an increase in consumer income,other things being equal,will cause
A)an upward movement along the demand curve for bus travel.
B)a downward movement along the demand curve for bus travel.
C)a rightward shift in the demand curve for bus travel.
D)a leftward shift in the demand curve for bus travel.

Accepted Answer

The answer of Assuming that bus travel is an inferior...

Question 6

Elaine,a small grocer,is planning to cut certain prices to increase her sales revenues.What will be the likely result of a price decrease for matches,a good for which the demand is inelastic,and a price decrease for fresh green tomatoes,an item for which consumer demand is elastic?
A)The total revenue derived from both will go up.
B)The total revenue derived from matches will increase,but total revenue derived from tomatoes will decline.
C)The total revenue derived from matches will decline,but total revenues derived from tomatoes will increase.
D)The total revenues derived from both will decline.

Accepted Answer

The answer of Elaine,a small grocer,is planning to cut certain...

Question 7

A normal good is defined by economists to be a good
A)with a negatively-sloped demand curve.
B)that is purchased by at least 75 percent of the population.
C)that is bought by consumers with normal tastes.
D)whose demand increases when incomes increase.
E)whose demand decreases when incomes increase.

Accepted Answer

A normal good is a good whose demand increases when incomes increase. This is because as consumers' incomes increase, they have more disposable income to spend on goods and services, including the normal good in question.

Question 8

Suppose the value of income elasticity of demand for a private college education is equal to 1.5.This means that
A)every $1 increase in income provides an incentive for a $1.50 increase in expenditures on private college education.
B)every $1.50 increase in income provides an incentive for a $1 increase in expenditures on private college education.
C)a 10 percent increase in income causes a 15 percent increase in the quantity of private college education purchased.
D)a 15 percent increase in income causes a 10 percent increase in the quantity of private college education purchased.
E)a 10 percent decrease in private college tuition will have a large enough income effect to increase spending on private college education by 15 percent.

Accepted Answer

The answer of Suppose the value of income elasticity of...

Question 9

If bus travel is an inferior good,then its income elasticity of demand will be
A)strictly greater than one.
B)positive.
C)equal to zero.
D)negative.

Accepted Answer

If bus travel is an inferior good, its income elasticity of demand will be negative, meaning that as income increases, demand for bus travel decreases.

Question 10

If Francis experiences a decrease in his income,we would expect that Francis's demand for
A)each good he purchases will remain unchanged.
B)normal goods will decrease.
C)most goods will increase.
D)inferior goods will decrease.

Accepted Answer

When income decreases, people tend to buy cheaper goods or reduce the quantity and quality of goods bought. Therefore, the demand for normal goods (those for which demand increases as income increases) will decrease.

Question 11

Sally recently got a 15 percent raise.She now purchases 7.5 percent more steak dinners.Sally's income elasticity for steak dinners is
A)0.5.
B)0.75.
C)1.5
D)2.

Accepted Answer

The answer of Sally recently got a 15 percent raise.She...

Question 12

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,
A)yours would be negative and your roommate's would be positive.
B)yours would be positive and your roommate's would be negative.
C)yours would be zero and your roommate's would approach infinity.
D)yours would approach infinity and your roommate's would be zero.

Accepted Answer

Income elasticity of demand measures how the quantity demanded of a good changes in response to a change in income. If your demand for Ramen noodles has increased with your higher income, your income elasticity of demand for Ramen noodles is positive. On the other hand, if your roommate's demand for Ramen noodles has decreased with her higher income, her income elasticity of demand for Ramen noodles is negative. Therefore, B is the best choice. The other choices do not accurately represent the scenario presented.

Question 13

Sarah recently got a 10 percent raise.She now purchases 30 percent more in groceries on a weekly basis.Sarah's income elasticity for groceries is
A)0.33.
B)0.5.
C)1.
D)3.

Accepted Answer

Income elasticity measures the responsiveness of quantity demanded to a change in income. In this case, Sarah's income increased by 10 percent and her quantity demanded for groceries increased by 30 percent. Therefore, her income elasticity for groceries is 30/10 = 3, which means that her quantity demanded for groceries is highly responsive to changes in income.

Question 14

The number of CDs purchased increased by 5 percent when consumer income increased by 10 percent.Assuming other factors are held constant,CDs would be classified as
A)inferior goods.
B)normal goods.
C)elastic goods.
D)inelastic goods.

Accepted Answer

The fact that the increase in consumer income led to an increase in demand for CDs suggests that CDs are normal goods.

Question 15

Muriel's income elasticity of demand for football tickets is 1.5.All else equal,this means that if her income increases by 20 percent,she will buy
A)150 percent more football tickets.
B)50 percent more football tickets.
C)30 percent more football tickets.
D)20 percent more football tickets.

Accepted Answer

Muriel's income elasticity of demand for football tickets is 1.5, therefore, if her income increases by 20 percent, her demand for football tickets will increase by 30 percent (1.5 multiplied by 20 percent). So, she will buy 30 percent more football tickets.

Question 16

Suppose the athletic department wanted to increase revenues by decreasing ticket prices to football games.This would make sense only if the price elasticity of demand for football games was (in absolute value)
A)greater than 1.
B)equal to 1.
C)less than 1.
D)perfectly inelastic.

Accepted Answer

If the price elasticity of demand for football games is greater than 1, then a decrease in ticket prices will lead to an increase in the quantity demanded by more than proportionally, resulting in an increase in total revenue. This is because the increase in quantity demanded will offset the decrease in ticket prices, resulting in a net increase in revenue. Therefore, decreasing ticket prices would make sense only if the price elasticity of demand for football games was greater than 1.

Question 17

If people buy less chewing gum at every price when their incomes fall,then
A)chewing gum is a normal good.
B)the demand for chewing gum is positively sloped.
C)demand for chewing gum has increased.
D)the price of chewing gum has increased.
E)there has been a decrease in population that changed demand.

Accepted Answer

When people buy less of a good as their incomes fall, it is an indication that the good is a normal good. In this case, chewing gum is a normal good.

Question 18

The difference between normal and inferior goods is that
A)an increase in price will shift the demand curve for a normal good rightward and the demand curve for an inferior good leftward.
B)if the price of a normal good increases,individuals who buy it are poorer;for inferior goods,the opposite is true.
C)an inferior good is something that will not be demanded until quantities of the normal good have been exhausted.
D)an increase in income will shift the demand curve for a normal good rightward and the demand curve for an inferior good leftward.

Accepted Answer

The answer of The difference between normal and inferior goods...

Question 19

If the price of apples increases,total expenditures on apples will decline if
A)there are few substitutes for apples.
B)the supply of apples is inelastic.
C)the demand for apples is elastic.
D)apples are a normal good.

Accepted Answer

If the demand for apples is elastic, then consumers will be more responsive to changes in price. As a result, an increase in price will lead to a decrease in the quantity demanded, which in turn will reduce total expenditures on apples. The other choices are not necessarily true in this scenario. There may or may not be substitutes for apples, the supply may or may not be inelastic, and apples may or may not be a normal good.

Question 20

Assuming that bus travel is an inferior good,a decrease in consumer income,other things being equal,will cause
A)a downward movement along the demand curve for bus travel.
B)no change in the demand curve for bus travel.
C)an upward movement along the demand curve for air travel.
D)a rightward shift in the demand curve for bus travel.

Accepted Answer

The answer of Assuming that bus travel is an inferior...

Quiz 20: Consumer Choice and Elasticity

An inferior good is a good whose quantity demanded

If the income elasticity of a good is positive,we can conclude that the good is

If a 10 percent increase in income induced a group of consumers to reduce their yearly purchases of potatoes by 5 percent,for these consumers,

A good is classified as inferior if

Assuming that bus travel is an inferior good,an increase in consumer income,other things being equal,will cause

Elaine,a small grocer,is planning to cut certain prices to increase her sales revenues.What will be the likely result of a price decrease for matches,a good for which the demand is inelastic,and a price decrease for fresh green tomatoes,an item for which consumer demand is elastic?

A normal good is defined by economists to be a good

Suppose the value of income elasticity of demand for a private college education is equal to 1.5.This means that

If bus travel is an inferior good,then its income elasticity of demand will be

If Francis experiences a decrease in his income,we would expect that Francis's demand for

Sally recently got a 15 percent raise.She now purchases 7.5 percent more steak dinners.Sally's income elasticity for steak dinners is

Sarah recently got a 10 percent raise.She now purchases 30 percent more in groceries on a weekly basis.Sarah's income elasticity for groceries is

The number of CDs purchased increased by 5 percent when consumer income increased by 10 percent.Assuming other factors are held constant,CDs would be classified as

Muriel's income elasticity of demand for football tickets is 1.5.All else equal,this means that if her income increases by 20 percent,she will buy

Suppose the athletic department wanted to increase revenues by decreasing ticket prices to football games.This would make sense only if the price elasticity of demand for football games was (in absolute value)

If people buy less chewing gum at every price when their incomes fall,then

The difference between normal and inferior goods is that

If the price of apples increases,total expenditures on apples will decline if

Assuming that bus travel is an inferior good,a decrease in consumer income,other things being equal,will cause