Question 1

Your local bakery gives you information on consumer purchasing habits for muffins and cupcakes.It tells you that,when the price of a muffin is $1,people buy 55 cupcakes.When the price of a muffin is raised to $2,cupcake purchases go up to 65 cupcakes.The cross-price elasticity of demand is:
A)0.50.
B)0.25.
C)0.67.
D)2.00.
E)4.00.

Accepted Answer

The answer of Your local bakery gives you information on...

Question 2

We would expect to see a positive cross-price elasticity between:
A)peanut butter and jelly.
B)ice cream and frozen yogurt.
C)basketballs and steak.
D)sneakers and socks.
E)computers and iPods.

Accepted Answer

The answer of We would expect to see a positive...

Question 3

Which one of the following pairs of goods is likely to have a negative cross-price elasticity of demand?
A)tea and coffee
B)soda and water
C)spaghetti and ravioli
D)tennis shoes and flip flops
E)coffee and cream

Accepted Answer

Negative cross-price elasticity of demand occurs when the price increase of one good leads to an increase in the demand for another good, indicating that the two goods are complements. Coffee and cream are complements because when the price of coffee increases, people might still buy it and, consequently, also buy cream to go with it, or vice versa.

Question 4

Cross-price elasticity measures the relationship between:
A)normal goods and inferior goods.
B)complements and inferior goods.
C)necessities and luxuries.
D)two goods and services.
E)income and substitute goods.

Accepted Answer

Cross-price elasticity measures the responsiveness of the demand for one good to a change in the price of another good, indicating whether the goods are substitutes or complements.

Question 5

Demand for which of the following goods/services is likely to be the LEAST elastic in a Minnesota winter?
A)a blue hooded sweatshirt with fur-lined pockets
B)a blue hooded sweatshirt
C)a hooded crew-neck sweatshirt
D)a blue sweatshirt
E)a sweatshirt

Accepted Answer

The answer of Demand for which of the following goods/services...

Question 6

If the cross-price elasticity of demand between Good A and Good B is 3,the price of Good B increases,and the price elasticity of demand for Good B is inelastic,we can expect to see a(n)________ change in the quantity demanded for Good A.
A)zero
B)small
C)infinite
D)one-for-one
E)large

Accepted Answer

When the cross-price elasticity of demand between two goods is positive, it means that they are substitutes. Therefore, if the price of Good B increases, demand for Good A (a substitute for Good B) is likely to increase. The magnitude of the change in demand for Good A depends on the cross-price elasticity of demand between the two goods. A cross-price elasticity of 3 suggests that the two goods are very close substitutes, so we can expect a relatively large increase in the quantity demanded for Good A. However, if the price elasticity of demand for Good B is inelastic, it means that the percentage change in quantity demanded is less than the percentage change in price. Therefore, the increase in the price of Good B will have a smaller impact on the quantity demanded for Good A than it would if the price elasticity of demand for Good B were elastic. Thus, the change in the quantity demanded for Good A will be small, so the best choice is B (small).

Question 7

Which one of the following pairs of goods is likely to have a positive cross-price elasticity of demand?
A)pancakes and waffles
B)fruit and bacon
C)butter and toast
D)potatoes and sausage
E)milk and coffee

Accepted Answer

The answer of Which one of the following pairs of...

Question 8

If the percentage change in quantity demanded of Good B is 2% and the percentage change in the price of Good A is -10%,what is the cross-price elasticity of demand?
A)0.20
B)-5
C)1
D)5
E)-0.20

Accepted Answer

The formula for cross-price elasticity of demand is:
Cross-price elasticity of demand = (Percentage change in quantity demanded of Good B) / (Percentage change in price of Good A)
Substituting the given values:
Cross-price elasticity of demand = 2% / (-10%) = -0.20
The negative sign indicates an inverse relationship between the two goods, meaning that when the price of Good A goes down, the quantity demanded of Good B goes up.

Question 9

Which one of the following pairs of goods is likely to have a negative cross-price elasticity of demand?
A)purses and backpacks
B)sofas and dining room tables
C)manicures and pedicures
D)shoes and socks
E)trucks and sedans

Accepted Answer

Negative cross-price elasticity of demand indicates that the two goods are complements, meaning that an increase in the price of one leads to a decrease in the demand for the other. Shoes and socks are typically used together, so if the price of shoes goes up, people might buy fewer socks as well, indicating they are complements.

Question 10

When her income increases from $10,000 to $20,000,as shown in the accompanying table,Marguerite 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: 
A)0.67.
B)1.20.
C)1.33.
D)0.83.
E)0.50.

Accepted Answer

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

Question 11

What good is most likely to have an income elasticity of demand equal to 0.3?
A)medication
B)takeout dinner
C)used clothing
D)laptop
E)a download on iTunes

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 12

When the price of pencils increases from $1.50 to $2.50,there is an increase in quantity demanded of pens from 100 to 150.The cross-price elasticity of demand between pencils and pens is:
A)1.25.
B)0.50.
C)0.40.
D)0.80.
E)0.75.

Accepted Answer

The answer of When the price of pencils increases from...

Question 13

The introduction of new gaming systems that can compete effectively with the Nintendo console will make the demand for the Nintendo console become:
A)more price elastic.
B)more price inelastic.
C)perfectly price elastic.
D)perfectly price inelastic.
E)unchanged.

Accepted Answer

The introduction of new gaming systems would increase the number of substitutes available to consumers, making the demand for the Nintendo console more price elastic. As consumers now have more options to choose from, they will be more sensitive to changes in price and will be more likely to switch to another console if the price of the Nintendo console goes up.

Question 14

When the price of erasers increases from $1.50 to $2.50,the quantity demanded of pencils is unchanged.The cross-price elasticity of demand between erasers and pencils is ________ because erasers and pencils ________.
A)1; are substitutes
B)1/2; are complements
C)0; are normal goods
D)0; are unrelated
E)-1/2; are complements

Accepted Answer

The fact that the quantity demanded of pencils is unchanged when the price of erasers increases indicates that erasers and pencils are unrelated goods. The cross-price elasticity of demand between unrelated goods is 0.

Question 15

If the cross-price elasticity of demand between Good A and Good B is 2 and the percentage change in price of Good A is 5%,what is the percentage change in quantity demanded of Good B?
A)3%
B)10%
C)-1.25%
D)1.50%
E)-3%

Accepted Answer

Using the formula for cross-price elasticity of demand:

% Change in Quantity Demanded of Good B = Cross-Price Elasticity x % Change in Price of Good A

% Change in Quantity Demanded of Good B = 2 x 5%

% Change in Quantity Demanded of Good B = 10%

Therefore, the percentage change in quantity demanded of Good B is 10%. The correct answer is B.

Question 16

When you change your quantity demanded of one good because of a change in price of another good,you are acting according to the principle of:
A)price elasticity of demand.
B)cross-price elasticity of demand.
C)income elasticity of demand.
D)price elasticity of supply.
E)income elasticity of supply.

Accepted Answer

The principle being described in the question is the concept of cross-price elasticity of demand, which measures the responsiveness of the quantity demanded of one good to a change in the price of another good. Therefore, option B is the correct answer. Option A refers to the responsiveness of quantity demanded to a change in the price of the same good. Option C refers to the responsiveness of quantity demanded to a change in income. Option D refers to the responsiveness of quantity supplied to a change in price. Option E refers to the responsiveness of quantity supplied to a change in income. None of these options are relevant to the scenario described in the question.

Question 17

What good is most likely to have an income elasticity of demand equal to 8?
A)a doctor's visit
B)toilet paper
C)used clothing
D)a five-star hotel
E)college coursework

Accepted Answer

Luxury goods and services, such as a five-star hotel, typically have a high income elasticity of demand. This means that as people's income increases, demand for the good or service increases at a faster rate than their income, resulting in a high income elasticity of demand.

Question 18

If the cross-price elasticity of demand is 6,Good A and Good B are:
A)inferior goods.
B)complements.
C)substitutes.
D)normal goods.
E)luxury goods.

Accepted Answer

A cross-price elasticity of demand (XED) of 6 indicates that Good A and Good B are substitutes. This means that an increase in the price of Good A will lead to an increase in the demand for Good B, and vice versa. For example, if the price of coffee (Good A) increases, consumers may switch to tea (Good B) instead, causing an increase in the demand for tea.

Question 19

If the cross-price elasticity of demand is -5,Good A and Good B are:
A)inferior goods.
B)complements.
C)substitutes.
D)normal goods.
E)luxury goods.

Accepted Answer

The answer of If the cross-price elasticity of demand is...

Question 20

Which one of the following pairs of goods is likely to have a positive cross-price elasticity of demand?
A)chocolate ice cream and sprinkles
B)ice cream shakes and hamburgers
C)fries and ketchup
D)Pepsi and Coke
E)onion rings and chicken strips

Accepted Answer

Positive cross-price elasticity of demand indicates that the goods are substitutes. Pepsi and Coke are classic examples of substitute goods, meaning if the price of one increases, the demand for the other is likely to increase as well.

Quiz 4: Elasticity

Your local bakery gives you information on consumer purchasing habits for muffins and cupcakes.It tells you that,when the price of a muffin is $1,people buy 55 cupcakes.When the price of a muffin is raised to $2,cupcake purchases go up to 65 cupcakes.The cross-price elasticity of demand is:

We would expect to see a positive cross-price elasticity between:

Which one of the following pairs of goods is likely to have a negative cross-price elasticity of demand?

Cross-price elasticity measures the relationship between:

Demand for which of the following goods/services is likely to be the LEAST elastic in a Minnesota winter?

If the cross-price elasticity of demand between Good A and Good B is 3,the price of Good B increases,and the price elasticity of demand for Good B is inelastic,we can expect to see a(n) ________ change in the quantity demanded for Good A.

Which one of the following pairs of goods is likely to have a positive cross-price elasticity of demand?

If the percentage change in quantity demanded of Good B is 2% and the percentage change in the price of Good A is -10%,what is the cross-price elasticity of demand?

Which one of the following pairs of goods is likely to have a negative cross-price elasticity of demand?

When her income increases from $10,000 to $20,000,as shown in the accompanying table,Marguerite 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:

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

When the price of pencils increases from $1.50 to $2.50,there is an increase in quantity demanded of pens from 100 to 150.The cross-price elasticity of demand between pencils and pens is:

The introduction of new gaming systems that can compete effectively with the Nintendo console will make the demand for the Nintendo console become:

When the price of erasers increases from $1.50 to $2.50,the quantity demanded of pencils is unchanged.The cross-price elasticity of demand between erasers and pencils is because erasers and pencils .

If the cross-price elasticity of demand between Good A and Good B is 2 and the percentage change in price of Good A is 5%,what is the percentage change in quantity demanded of Good B?

When you change your quantity demanded of one good because of a change in price of another good,you are acting according to the principle of:

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

If the cross-price elasticity of demand is 6,Good A and Good B are:

If the cross-price elasticity of demand is -5,Good A and Good B are:

Which one of the following pairs of goods is likely to have a positive cross-price elasticity of demand?