Question 1

When Sam's annual income was only $15,000, he purchased 50 pounds of bananas a year. When his income rose to $18,000, he purchased 55 pounds a year. Therefore

Accepted Answer

Bananas are a normal good for Sam because as his income increased from $15,000 to $18,000, his consumption of bananas also increased from 50 to 55 pounds, indicating a positive income elasticity of demand.

Question 2

The income elasticity of demand for bicycles is +10, which implies that bicycles are

Accepted Answer

A positive income elasticity of demand greater than 1 indicates that bicycles are a normal good, specifically a luxury good, as demand increases significantly with income.

Question 3

If the income elasticity for chocolate chip cookies is 1.84, then chocolate chip cookies are

Accepted Answer

A good is considered income elastic if the income elasticity is greater than 1, and it is a normal good if the elasticity is positive. An elasticity of 1.84 indicates that chocolate chip cookies are a normal good and income elastic.

Question 4

If a good is inferior, its income elasticity will be

Accepted Answer

Inferior goods have a negative income elasticity of demand, meaning that as income increases, the demand for these goods decreases.

Question 5

Bus rides and canned soup are inferior goods, so the ________ elasticity of demand is ________.

Accepted Answer

Inferior goods have a negative income elasticity of demand, meaning that as income increases, the demand for these goods decreases.

Question 6

The income elasticity of demand is largest for

Accepted Answer

Luxuries have the largest income elasticity of demand because as income increases, the demand for luxury goods increases more than proportionately.

Question 7

The income elasticity of demand is defined as the percentage change in

Accepted Answer

Income elasticity of demand measures how much the quantity demanded of a good responds to a change in consumers' income, calculated as the percentage change in quantity demanded divided by the percentage change in income.

Question 8

The income elasticity of demand is ________ for a normal good and ________ for an inferior good.

Accepted Answer

For a normal good, the income elasticity of demand is positive because demand increases as income increases. For an inferior good, it is negative because demand decreases as income increases.

Question 9

Goods whose income elasticities are negative are called

Accepted Answer

Inferior goods are those for which demand decreases as consumer income rises, resulting in a negative income elasticity.

Question 10

To say that turnips are inferior goods means that the income elasticity

Accepted Answer

Inferior goods have a negative income elasticity of demand, meaning that as income increases, the demand for these goods decreases.

Question 11

When consumers' incomes increased 10 percent, the quantity of milk bought increased 5 percent. This result means

Accepted Answer

Milk is a necessity because the percentage increase in quantity demanded is less than the percentage increase in income, indicating it is income inelastic.

Question 12

A normal good is defined as a good for which the demand curve

Accepted Answer

A normal good is one for which demand increases as consumer income rises, causing the demand curve to shift rightward.

Question 13

Demand is income elastic if

Accepted Answer

Demand is income elastic when a small percentage increase in income leads to a larger percentage increase in quantity demanded, indicating that the good is a luxury.

Question 14

A report shows that sales at Target stores increased in 2016 compared to the previous year. Incomes grew between 2015 and 2016. Using that fact and the sales data given above means that Target definitely is selling goods and services that

Accepted Answer

When incomes increase and sales at Target also increase, it suggests that Target is selling normal goods, as the demand for normal goods rises with an increase in income.

Question 15

The income elasticity of demand is

Accepted Answer

Income elasticity of demand is positive for normal goods because demand increases as income increases, and negative for inferior goods because demand decreases as income increases.

Question 16

If the income elasticity of demand for spaghetti is -1.3, then spaghetti

Accepted Answer

A negative income elasticity of demand indicates that spaghetti is an inferior good, meaning demand decreases as income increases.

Question 17

The income elasticity of demand is the percentage change in ________ divided by the percentage change in ________.

Accepted Answer

Income elasticity of demand measures how the quantity demanded of a good responds to changes in consumer income.

Question 18

When consumers' incomes increased 6 percent, the quantity of wine bought increased 12 percent. This result means

Accepted Answer

The income elasticity of demand is greater than 1 (12%/6% = 2), indicating that wine is a luxury good, as demand increases more than proportionally with income.

Question 19

For Product X, the income elasticity of demand is 1.16. Which of the following is therefore definitely TRUE?

Accepted Answer

Product X is income elastic because the income elasticity of demand is greater than 1.

Question 20

For Product X, the income elasticity of demand is -2.56. Which of the following is therefore TRUE?

Accepted Answer

A negative income elasticity of demand indicates that Product X is an inferior good, meaning demand decreases as income increases.

Quiz 4: Elasticity

When Sam's annual income was only $15,000, he purchased 50 pounds of bananas a year. When his income rose to $18,000, he purchased 55 pounds a year. Therefore

The income elasticity of demand for bicycles is +10, which implies that bicycles are

If the income elasticity for chocolate chip cookies is 1.84, then chocolate chip cookies are

If a good is inferior, its income elasticity will be

Bus rides and canned soup are inferior goods, so the elasticity of demand is .

The income elasticity of demand is largest for

The income elasticity of demand is defined as the percentage change in

The income elasticity of demand is for a normal good and for an inferior good.

Goods whose income elasticities are negative are called

To say that turnips are inferior goods means that the income elasticity

When consumers' incomes increased 10 percent, the quantity of milk bought increased 5 percent. This result means

A normal good is defined as a good for which the demand curve

Demand is income elastic if

A report shows that sales at Target stores increased in 2016 compared to the previous year. Incomes grew between 2015 and 2016. Using that fact and the sales data given above means that Target definitely is selling goods and services that

The income elasticity of demand is

If the income elasticity of demand for spaghetti is -1.3, then spaghetti

The income elasticity of demand is the percentage change in divided by the percentage change in .

When consumers' incomes increased 6 percent, the quantity of wine bought increased 12 percent. This result means

For Product X, the income elasticity of demand is 1.16. Which of the following is therefore definitely TRUE?

For Product X, the income elasticity of demand is -2.56. Which of the following is therefore TRUE?