Question 1

The income elasticity of demand for ground beef has been estimated to be -0.197.If income falls by 10 percent in a period, how will that affect total expenditures on ground beef in that period, all other things unchanged?

Accepted Answer

Given the income elasticity of demand for ground beef is -0.197, a 10 percent fall in income would lead to an increase in demand for ground beef (since it's an inferior good indicated by the negative elasticity). This increase in demand, all other things being equal, would lead to an increase in total expenditures on ground beef.

Question 2

To say that two goods are complements, their cross price elasticities of demand should be:

Accepted Answer

Cross price elasticities of demand measure the responsiveness of the demand of one good to changes in the price of another good. Complementary goods have a negative cross price elasticity of demand, which means that when the price of one good increases, the demand for the other good will decrease. Therefore, the correct answer is A) less than zero.

Question 3

Use the following for questions 163-168.
Exhibit: Johnson's Income and Expenditures
Quantity Purchased per Month
 
-(Exhibit: Johnson's Income and Expenditures) Johnson's income elasticity of demand for pizzas is:

Accepted Answer

Johnson's income elasticity of demand for pizzas is approximately -0.7 because as his income increases, his demand for pizzas decreases. This is because pizzas are a normal good, and as income increases, consumers tend to substitute more expensive goods for less expensive goods.

Question 4

The income elasticity of demand for ground beef has been estimated to be -0.197.If income falls by 20 percent in a period, how will that affect total expenditures on ground beef in that period, all other things unchanged?

Accepted Answer

The negative income elasticity of demand indicates that ground beef is an inferior good, meaning that as income falls, demand for it increases. A 20 percent decrease in income would lead to an increase in demand for ground beef, likely increasing total expenditures on it, assuming price and other factors remain constant.

Question 5

If your purchases of shoes increase from 9 pairs per year to 11 pairs per year when your income increases from $19,000 to $21,000 a year, then your income elasticity of demand for shoes is:

Accepted Answer

The income elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in income. Here, the quantity demanded of shoes increases from 9 to 11 pairs, which is a change of 2 pairs on the original 9, or approximately 22.22%. The income increases from $19,000 to $21,000, which is a change of $2,000 on the original $19,000, or approximately 10.53%. Therefore, the income elasticity of demand = 22.22% / 10.53% = approximately 2. This indicates that shoes are a normal good with a relatively high income elasticity, meaning demand for shoes increases more than proportionately as income increases.

Question 6

The income elasticity of demand for ground beef has been estimated to be -0.197.If income falls by 20 percent in a period, how will that affect demand for ground beef in that period, all other things unchanged?

Accepted Answer

The income elasticity of demand is -0.197, indicating that ground beef is an inferior good. A 20% decrease in income will increase demand by 0.197 * 20% = 3.94%, which is almost 4%.

Question 7

Use the following for questions 163-168.
Exhibit: Johnson's Income and Expenditures
Quantity Purchased per Month
 
-(Exhibit: Johnson's Income and Expenditures) Johnson's income elasticity of demand for steaks is:

Accepted Answer

The answer of Use the following for questions 163-168.
Exhibit: Johnson's...

Question 8

Use the following for questions 163-168.
Exhibit: Johnson's Income and Expenditures
Quantity Purchased per Month
 
-(Exhibit: Johnson's Income and Expenditures) Johnson's income elasticity of demand for magazines is:

Accepted Answer

The answer of Use the following for questions 163-168.
Exhibit: Johnson's...

Question 9

The income elasticity of demand for peaches has been estimated to be 1.43.If income grows by 15 percent in a period, how will that affect demand for peaches in that period, all other things unchanged?

Accepted Answer

The income elasticity of demand for peaches is positive, which means that as income increases, demand for peaches will also increase. The magnitude of the elasticity, 1.43, indicates that a 1% increase in income will lead to a 1.43% increase in demand for peaches. Therefore, a 15% increase in income will result in a 1.43 x 15 = 21.5% increase in demand for peaches. So, choice B is the correct answer.

Question 10

The income elasticity of demand for ground beef has been estimated to be -0.197.If income drops by 10 percent in a period, how will that affect demand for ground beef in that period, all other things unchanged?

Accepted Answer

The income elasticity of demand is -0.197, indicating that ground beef is an inferior good. A 10% decrease in income will lead to a 1.97% increase in demand, calculated as -0.197 * (-10%).

Question 11

The percentage change in quantity demanded of one good or service divided by the percentage change in the price of a related good or service is:

Accepted Answer

The percentage change in quantity demanded of one good or service divided by the percentage change in the price of a related good or service is the definition of cross price elasticity of demand. Therefore, the correct choice is (D) cross price elasticity of demand.

Question 12

To say that two goods are unrelated, their cross price elasticities of demand should be:

Accepted Answer

If two goods are unrelated, their cross price elasticities of demand should be equal to zero. This means that a change in the price of one good will not impact the demand for the other good. If the cross price elasticity of demand is less than or greater than zero, it indicates that the two goods are related in some way, either as substitutes or complements, respectively.

Question 13

The income elasticity of demand for eggs has been estimated to be 0.57.If income grows by 15 percent in a period, how will that affect total expenditures on eggs in that period, all other things unchanged?

Accepted Answer

The income elasticity of demand for eggs is 0.57, which means that a 1% increase in income leads to a 0.57% increase in the demand for eggs. Therefore, if income grows by 15%, we can expect the demand for eggs to increase by 0.57*15 = 8.55%. As a result of this increase in demand, total expenditures on eggs will also rise, hence the correct answer is B.

Question 14

Use the following for questions 163-168.
Exhibit: Johnson's Income and Expenditures
Quantity Purchased per Month
 
-(Exhibit: Johnson's Income and Expenditures) Johnson's income elasticity of demand for movies is:

Accepted Answer

Johnson's income elasticity of demand for movies is 0 because his spending on movies does not change as his income changes.

Question 15

To say that two goods are substitutes, their cross price elasticities of demand should be:

Accepted Answer

Cross price elasticity of demand measures the responsiveness of demand for one good to a change in the price of another related good. If the cross price elasticity of demand is greater than zero, it means that the two goods are substitutes. This is because an increase in the price of one good will lead to an increase in demand for the other good. Therefore, the best choice is D, which states that the cross price elasticities of demand between two substitute goods are greater than zero.

Question 16

The income elasticity of demand for eggs has been estimated to be 0.57.If income grows by 5 percent in a period, how will that affect demand for eggs in that period, all other things unchanged?

Accepted Answer

The income elasticity of demand for eggs is positive but less than 1 (0.57). This means that eggs are a normal good, but not very sensitive to changes in income. Therefore, a 5 percent increase in income would lead to a 5 percent x 0.57 = 2.85 percent increase in demand for eggs. This is closest to choice B, which says demand will increase by about 2.9 percent.

Question 17

The income elasticity of demand for peaches has been estimated to be 1.43.If income grows by 15 percent in a period, how will that affect total expenditures on peaches in that period, all other things unchanged?

Accepted Answer

The income elasticity of demand being 1.43 suggests that peaches are a normal good (since income elasticity is positive) and a 15% increase in income will cause the demand for peaches to increase by 1.43 x 15% = 21.45%. Since total spending on peaches will increase as a result of the increase in demand, total expenditures on peaches will rise. Therefore, the correct answer is A.

Question 18

If your purchases of shoes decrease from 11 pairs per year to 9 pairs per year when your income increases from $19,000 to $21,000 a year, then your income elasticity of demand for shoes is.

Accepted Answer

The answer of If your purchases of shoes decrease from...

Question 19

Use the following for questions 163-168.
Exhibit: Johnson's Income and Expenditures
Quantity Purchased per Month
 
-(Exhibit: Johnson's Income and Expenditures) For Johnson, pizzas are a(n):

Accepted Answer

The answer of Use the following for questions 163-168.
Exhibit: Johnson's...

Question 20

Use the following for questions 163-168.
Exhibit: Johnson's Income and Expenditures
Quantity Purchased per Month
 
-(Exhibit: Johnson's Income and Expenditures) For Johnson, magazines are a(n):

Accepted Answer

Johnson's demand for magazines increases as his income increases, indicating that magazines are a normal good for him.

Quiz 5: Elasticity: a Measure of Response

The income elasticity of demand for ground beef has been estimated to be -0.197.If income falls by 10 percent in a period, how will that affect total expenditures on ground beef in that period, all other things unchanged?

To say that two goods are complements, their cross price elasticities of demand should be:

Use the following for questions 163-168. Exhibit: Johnson's Income and Expenditures Quantity Purchased per Month -(Exhibit: Johnson's Income and Expenditures) Johnson's income elasticity of demand for pizzas is:

The income elasticity of demand for ground beef has been estimated to be -0.197.If income falls by 20 percent in a period, how will that affect total expenditures on ground beef in that period, all other things unchanged?

If your purchases of shoes increase from 9 pairs per year to 11 pairs per year when your income increases from $19,000 to $21,000 a year, then your income elasticity of demand for shoes is:

The income elasticity of demand for ground beef has been estimated to be -0.197.If income falls by 20 percent in a period, how will that affect demand for ground beef in that period, all other things unchanged?

Use the following for questions 163-168. Exhibit: Johnson's Income and Expenditures Quantity Purchased per Month -(Exhibit: Johnson's Income and Expenditures) Johnson's income elasticity of demand for steaks is:

Use the following for questions 163-168. Exhibit: Johnson's Income and Expenditures Quantity Purchased per Month -(Exhibit: Johnson's Income and Expenditures) Johnson's income elasticity of demand for magazines is:

The income elasticity of demand for peaches has been estimated to be 1.43.If income grows by 15 percent in a period, how will that affect demand for peaches in that period, all other things unchanged?

The income elasticity of demand for ground beef has been estimated to be -0.197.If income drops by 10 percent in a period, how will that affect demand for ground beef in that period, all other things unchanged?

The percentage change in quantity demanded of one good or service divided by the percentage change in the price of a related good or service is:

To say that two goods are unrelated, their cross price elasticities of demand should be:

The income elasticity of demand for eggs has been estimated to be 0.57.If income grows by 15 percent in a period, how will that affect total expenditures on eggs in that period, all other things unchanged?

Use the following for questions 163-168. Exhibit: Johnson's Income and Expenditures Quantity Purchased per Month -(Exhibit: Johnson's Income and Expenditures) Johnson's income elasticity of demand for movies is:

To say that two goods are substitutes, their cross price elasticities of demand should be:

The income elasticity of demand for eggs has been estimated to be 0.57.If income grows by 5 percent in a period, how will that affect demand for eggs in that period, all other things unchanged?

The income elasticity of demand for peaches has been estimated to be 1.43.If income grows by 15 percent in a period, how will that affect total expenditures on peaches in that period, all other things unchanged?

If your purchases of shoes decrease from 11 pairs per year to 9 pairs per year when your income increases from $19,000 to $21,000 a year, then your income elasticity of demand for shoes is.

Use the following for questions 163-168. Exhibit: Johnson's Income and Expenditures Quantity Purchased per Month -(Exhibit: Johnson's Income and Expenditures) For Johnson, pizzas are a(n) :

Use the following for questions 163-168. Exhibit: Johnson's Income and Expenditures Quantity Purchased per Month -(Exhibit: Johnson's Income and Expenditures) For Johnson, magazines are a(n) :