Question 1

If the cross-price elasticity between ketchup and hamburgers is -1.2, a 4 percent increase in the price of ketchup will lead to a 4.8 percent:
A) drop in quantity demanded of ketchup.
B) drop in quantity demanded of hamburgers.
C) increase in quantity demanded of ketchup.
D) increase in quantity demanded of hamburgers.

Accepted Answer

The negative cross-price elasticity of -1.2 indicates that ketchup and hamburgers are complements. A 4% increase in the price of ketchup leads to a 4.8% drop in the quantity demanded of hamburgers, as the formula for cross-price elasticity is (% change in quantity demanded of good Y) / (% change in price of good X).

Question 2

Suppose demand is given by Q_x^d = 50 - 4P_x + 6P_y + A_x, where P_x = $4, P_y = $2, and A_x = $50. What is the quantity demanded of good x? A) 96 B) 50 C) 46 D) 72

Accepted Answer

The quantity demanded of good x can be calculated by substituting the given values into the demand equation: Q = 50 - 4(4) + 6(2) + 50 = 50 - 16 + 12 + 50 = 96.

Question 3

We would expect the own price elasticity of demand for food to be:
A) less elastic than the demand for cereal.
B) more elastic than the demand for cereal.
C) the same as that for soap.
D) perfectly inelastic.

Accepted Answer

The demand for food in general is less elastic than the demand for specific food items like cereal because food is a basic necessity, and consumers will continue to buy it even if prices rise, whereas they can more easily substitute between different types of food items.

Question 4

Suppose the demand for good x is ln Q_x^d = 21 - 0.8 ln P_x - 1.6 ln P_y + 6.2 ln M + 0.4 ln A_x. Then we know good x is: A) an inferior good. B) an elastic good. C) a normal good. D) a Giffen good.

Accepted Answer

According to the demand function, the quantity demanded of good x is positively related to income (M) and negatively related to its own price (Px) and the price of another good (Py). Additionally, the coefficient of ln(Px) is negative, which means that good x is a normal good. There is no indication of a positive relationship between price and quantity demanded, which is necessary for a Giffen good. Finally, there is no indication of elastic or inelastic demand, so we cannot determine whether the good is elastic or inelastic.

Question 5

Suppose the demand function is given by Q_x^d = 8P_x^0.5 P_y^0.25 M^0.12 H. Then the demand for good x is: A) inelastic. B) unitary. C) elastic. D) perfectly elastic.

Accepted Answer

The answer of Suppose the demand function is given by...

Question 6

If the income elasticity for lobster is 0.4, a 40 percent increase in income will lead to a:
A) 10 percent drop in demand for lobster.
B) 16 percent increase in demand for lobster.
C) 20 percent increase in demand for lobster.
D) 4 percent increase in demand for lobster.

Accepted Answer

Income elasticity of demand measures how the quantity demanded of a good responds to a change in income, calculated as the percentage change in quantity demanded divided by the percentage change in income. Here, with an income elasticity of 0.4 and a 40% increase in income, the demand for lobster would increase by 0.4 * 40% = 16%.

Question 7

If the cross-price elasticity between goods A and B is negative, we know the goods are:
A) inferior goods.
B) complements.
C) inelastic.
D) substitutes.

Accepted Answer

When the cross-price elasticity between goods A and B is negative, it means that an increase in the price of good A leads to a decrease in the quantity demanded of good B, and vice versa. This suggests that the two goods are complements, meaning that they are usually consumed together as a pair. Examples of complementary goods include coffee and sugar, or printers and ink cartridges.

Question 8

Suppose demand is given by Q_x^d = 50 - 4P_x + 6P_y + A_x, where P_x = $4, P_y = $2, and A_x = $50. What is the advertising elasticity of demand for good x? A) 1.12 B) 0.38 C) 1.92 D) 0.52

Accepted Answer

The answer of Suppose demand is given by Q_x^d =...

Question 9

The elasticity that measures the responsiveness of consumer demand to changes in income is the:
A) income elasticity.
B) own price elasticity.
C) cross-price elasticity.
D) neither the income elasticity, the own price elasticity, nor the cross-price elasticity.

Accepted Answer

The income elasticity measures the responsiveness of consumer demand to changes in income. Therefore, the correct choice is A. The own price elasticity measures the responsiveness of consumer demand to changes in the price of a good, while the cross-price elasticity measures the responsiveness of consumer demand to changes in the price of a related good. The option D is incorrect as these three are the most common elasticity measures in economics.

Question 10

Suppose the demand function is Q_x^d = 100 - 8P_x + 6P_y - M. If P_x = $4, P_y = $2, and M = $10, what is the cross-price elasticity of good x with respect to the price of good y? A) 0.17 B) 0.38 C) 0.21 D) 0.04

Accepted Answer

The answer of Suppose the demand function is Q_x^d =...

Question 11

Suppose the demand for good x is ln Q_x^d = 21 - 0.8 ln P_x - 1.6 ln P_y + 6.2 ln M + 0.4 ln A_x. Then we know goods x and y are: A) substitutes. B) complements. C) normal goods. D) inferior goods.

Accepted Answer

The answer of Suppose the demand for good x is...

Question 12

If the price of pork chops falls from $8 to $6, and this leads to an increase in demand for apple sauce from 100 to 140 jars, what is the cross-price elasticity of apple sauce and pork chops at a pork chop price of $6?
A) -1.17
B) 2.71
C) 0.42
D) -0.86

Accepted Answer

The answer of If the price of pork chops falls...

Question 13

You are the manager of a supermarket, and you know that the income elasticity of peanut butter is exactly -0.7. Due to the economic recession, you expect incomes to drop by 15 percent next year. How should you adjust your purchase of peanut butter?
A) Buy 10.5 percent more peanut butter.
B) Buy 2.14 percent more peanut butter.
C) Buy 6.2 percent less peanut butter.
D) Buy 9.8 percent less peanut butter.

Accepted Answer

The income elasticity of demand for peanut butter is -0.7, meaning it's an inferior good (negative elasticity). With a 15% drop in income, demand for peanut butter increases because people switch to less expensive goods. The calculation is -0.7 * (-15%) = 10.5%. Therefore, you should buy 10.5% more peanut butter.

Question 14

An income elasticity less than zero tells us that the good is:
A) a normal good.
B) a Giffen good.
C) an inferior good.
D) an inelastic good.

Accepted Answer

An income elasticity less than zero indicates that as consumers' income increases, they consume less of the good. This is a characteristic of an inferior good, which is typically a lower-quality or less expensive alternative to other goods. As consumers' incomes rise, they can afford to purchase higher-quality or more expensive substitutes, leading to a decrease in demand for the inferior good.

Question 15

Suppose the demand function is given by Q_x^d = 8P_x^0.5 P_y^0.25 M^0.12 H. Then the cross-price elasticity between goods x and y is: A) 4.00. B) 0.25. C) 0.50. D) 8.33.

Accepted Answer

The formula for cross-price elasticity is % change in quantity demanded of x / % change in price of y. To find the cross-price elasticity between goods x and y, we need to differentiate demand with respect to the price of y:

dQx/dPy = -0.25PS1U1B1xS1U1B0S1U1P1 / 0.12PS1U1B1yS1U1B0S1U1P1

We can simplify this expression:

dQx/dPy = -2.08 * (Px / Py)

Now we can find the cross-price elasticity:

(dQx/dPy) * (Py / Qx) = -2.08

The answer is therefore B, 0.25.

Question 16

The statistical analysis of economic phenomena is defined as:
A) econometrics.
B) variance.
C) confidence intervals.
D) standard deviation.

Accepted Answer

Econometrics is the branch of economics that uses mathematical and statistical methods to analyze economic phenomena. Variance, confidence intervals, and standard deviation are all specific statistical concepts that are used within econometrics, but econometrics encompasses a broader range of methods and techniques.

Question 17

Suppose the demand for good x is ln Q_x^d = 21 - 0.8 ln P_x - 1.6 ln P_y + 6.2 ln M + 0.4 ln A_x. Then we know that the own price elasticity for good x is: A) unitary. B) elastic. C) inelastic. D) It cannot be calculated from the existing information.

Accepted Answer

The own price elasticity of good x can be calculated as follows: εp = (∂ ln Q_x^d / ∂ ln P_x) * (P_x / Q_x) Taking the derivative and plugging in the values: εp = (-0.8) * (P_x / Q_x) Since P_x and Q_x are both positive, the sign of εp will be negative. Thus, the demand for good x is inelastic, meaning a change in price will result in a proportionally smaller change in quantity demanded.

Question 18

Suppose the demand function is given by Q_x^d = 8P_x^0.5 P_y^0.25 M^0.12 H. Then good x is: A) a normal good. B) an inferior good. C) a complement for good y. D) perfectly inelastic.

Accepted Answer

If the demand for good x increases as income increases, then it is a normal good. The positive value of S1U1B1x indicates that good x is a normal good.

Question 19

You are the manager of a popular shoe company. You know that the advertising elasticity of demand for your product is 0.15. How much will you have to increase advertising in order to increase demand by 10 percent?
A) 0.02 percent
B) 38.6 percent
C) 66.7 percent
D) 4.3 percent

Accepted Answer

The formula for advertising elasticity of demand is:

% Change in quantity demanded / % Change in advertising

We know that the advertising elasticity of demand is 0.15, which means that a 1 percent increase in advertising will lead to a 0.15 percent increase in quantity demanded.

To increase demand by 10 percent, we need to solve for the percentage increase in advertising:

10% = (x) * 0.15

x = 66.7%

Therefore, we would need to increase advertising by 66.7% in order to increase demand by 10 percent.

Question 20

The elasticity which shows the responsiveness of the demand for a good due to changes in the price of a related good is the:
A) own price elasticity.
B) income elasticity.
C) log-linear elasticity.
D) cross-price elasticity.

Accepted Answer

The elasticity which shows the responsiveness of demand for a good due to changes in the price of a related good is the cross-price elasticity. This measures how much the quantity demanded of one good changes when there is a change in the price of another related good.

Quiz 3: Quantitative Demand Analysis

If the cross-price elasticity between ketchup and hamburgers is -1.2, a 4 percent increase in the price of ketchup will lead to a 4.8 percent:

Suppose demand is given by Qxd = 50 - 4Px + 6Py + Ax, where Px = $4, Py = $2, and Ax = $50. What is the quantity demanded of good x?

We would expect the own price elasticity of demand for food to be:

Suppose the demand for good x is ln Qxd = 21 - 0.8 ln Px - 1.6 ln Py + 6.2 ln M + 0.4 ln Ax. Then we know good x is:

Suppose the demand function is given by Qxd = 8Px0.5 Py0.25 M0.12 H. Then the demand for good x is:

If the income elasticity for lobster is 0.4, a 40 percent increase in income will lead to a:

If the cross-price elasticity between goods A and B is negative, we know the goods are:

Suppose demand is given by Qxd = 50 - 4Px + 6Py + Ax, where Px = $4, Py = $2, and Ax = $50. What is the advertising elasticity of demand for good x?

The elasticity that measures the responsiveness of consumer demand to changes in income is the:

Suppose the demand function is Qxd = 100 - 8Px + 6Py - M. If Px = $4, Py = $2, and M = $10, what is the cross-price elasticity of good x with respect to the price of good y?

Suppose the demand for good x is ln Qxd = 21 - 0.8 ln Px - 1.6 ln Py + 6.2 ln M + 0.4 ln Ax. Then we know goods x and y are:

If the price of pork chops falls from $8 to $6, and this leads to an increase in demand for apple sauce from 100 to 140 jars, what is the cross-price elasticity of apple sauce and pork chops at a pork chop price of $6?

You are the manager of a supermarket, and you know that the income elasticity of peanut butter is exactly -0.7. Due to the economic recession, you expect incomes to drop by 15 percent next year. How should you adjust your purchase of peanut butter?

An income elasticity less than zero tells us that the good is:

Suppose the demand function is given by Qxd = 8Px0.5 Py0.25 M0.12 H. Then the cross-price elasticity between goods x and y is:

The statistical analysis of economic phenomena is defined as:

Suppose the demand for good x is ln Qxd = 21 - 0.8 ln Px - 1.6 ln Py + 6.2 ln M + 0.4 ln Ax. Then we know that the own price elasticity for good x is:

Suppose the demand function is given by Qxd = 8Px0.5 Py0.25 M0.12 H. Then good x is:

You are the manager of a popular shoe company. You know that the advertising elasticity of demand for your product is 0.15. How much will you have to increase advertising in order to increase demand by 10 percent?

The elasticity which shows the responsiveness of the demand for a good due to changes in the price of a related good is the:

Suppose demand is given by Q_x^d = 50 - 4P_x + 6P_y + A_x, where P_x = $4, P_y = $2, and A_x = $50. What is the quantity demanded of good x?

Suppose the demand for good x is ln Q_x^d = 21 - 0.8 ln P_x - 1.6 ln P_y + 6.2 ln M + 0.4 ln A_x. Then we know good x is:

Suppose the demand function is given by Q_x^d = 8P_x^0.5 P_y^0.25 M^0.12 H. Then the demand for good x is:

Suppose demand is given by Q_x^d = 50 - 4P_x + 6P_y + A_x, where P_x = $4, P_y = $2, and A_x = $50. What is the advertising elasticity of demand for good x?

Suppose the demand function is Q_x^d = 100 - 8P_x + 6P_y - M. If P_x = $4, P_y = $2, and M = $10, what is the cross-price elasticity of good x with respect to the price of good y?

Suppose the demand for good x is ln Q_x^d = 21 - 0.8 ln P_x - 1.6 ln P_y + 6.2 ln M + 0.4 ln A_x. Then we know goods x and y are:

Suppose the demand function is given by Q_x^d = 8P_x^0.5 P_y^0.25 M^0.12 H. Then the cross-price elasticity between goods x and y is:

Suppose the demand for good x is ln Q_x^d = 21 - 0.8 ln P_x - 1.6 ln P_y + 6.2 ln M + 0.4 ln A_x. Then we know that the own price elasticity for good x is:

Suppose the demand function is given by Q_x^d = 8P_x^0.5 P_y^0.25 M^0.12 H. Then good x is: