Question 1

If the cross elasticity of demand for two goods is positive, the two goods are _____ goods.

Accepted Answer

When the cross elasticity of demand for two goods is positive, it means that as the price of one good increases, the demand for the other good also increases, indicating that the two goods are substitutes for each other.

Question 2

If the income elasticity of demand for tea is 0.50, tea is a

Accepted Answer

The income elasticity of demand measures how the quantity demanded of a good responds to a change in income. A positive elasticity less than 1 (0.50 in this case) indicates that tea is a normal good, meaning demand for it increases as income increases, but at a slower rate than the increase in income.

Question 3

Suppose your income falls from $35,000 to $33,000 and that your quantity demanded of a good increases from 40 to 55 units. You consider the good to be a(n) _____ good.

Accepted Answer

When income falls and the quantity demanded of a good increases, the good is considered an inferior good. This is because consumers buy more of the good when their income decreases, indicating they view it as a less desirable substitute for more expensive options.

Question 4

If soda and potato chips are complements, then their cross elasticity of demand is

Accepted Answer

Complements have a negative cross elasticity of demand because as the price of one good increases, the demand for its complement decreases, and vice versa.

Question 5

Assume that Vitamin Water and Gatorade are substitutes. Their cross elasticity of demand is

Accepted Answer

The cross elasticity of demand between substitutes is positive, indicating that an increase in the price of one leads to an increase in the demand for the other.

Question 6

Last year, Paula's income was $15,000 and she enrolled in 12 hours of courses in college. This year, Paula's income is $35,000 and she is enrolled in 3 hours of courses in college. For Paula, college is a(n) ____ good.

Accepted Answer

An inferior good is one where demand decreases as income increases. Since Paula's income increased and her enrollment in college courses decreased, college is considered an inferior good for her.

Question 7

A normal good has a(n)

Accepted Answer

A normal good has a positive income elasticity of demand, meaning that as income increases, the demand for the good also increases. This elasticity is greater than 0 but can be less than 1, indicating that the good is a necessity rather than a luxury.

Question 8

If an increase in income of 10% causes an increase in quantity demanded of 20% for a good, the good is a(n) _____ good.

Accepted Answer

A luxury good is characterized by a greater than proportional increase in quantity demanded as income increases, indicating an income elasticity greater than 1.

Question 9

A positive cross elasticity of demand between two goods suggests that the goods are

Accepted Answer

A positive cross elasticity of demand indicates that as the price of one good increases, the demand for another good also increases, suggesting that the two goods are substitutes for each other.

Question 10

Which of these is the MOST income elastic?

Accepted Answer

Spa visits are considered a luxury good, which typically have higher income elasticity compared to necessities like bread or paper towels.

Question 11

Which good is the MOST income inelastic?

Accepted Answer

Cigarettes are the most income inelastic good among the options provided. This is because the demand for cigarettes tends to be less sensitive to changes in income compared to luxury items like private college education, diamonds, and caviar. People who are addicted to cigarettes will continue to buy them even if their income decreases, making the demand for cigarettes relatively stable across different income levels.

Question 12

Based on sales history, a retailer calculates that E_Y for frozen pizza is -0.8. Now, due to a recession, incomes in the market area are down 10%. Based on the given information, it can be estimated that frozen pizza sales will

Accepted Answer

The answer of Based on sales history, a retailer calculates...

Question 13

Goods that have positive income elasticity less than 1 are _____ goods.

Accepted Answer

Goods with a positive income elasticity of less than 1 are considered normal goods. This means that as income increases, the demand for these goods also increases, but at a slower rate than the increase in income.

Question 14

Goods that have income elasticity greater than 1 are _____ goods.

Accepted Answer

Goods that have an income elasticity greater than 1 are considered luxury goods, meaning that as income increases, the demand for these goods increases more than proportionally.

Question 15

If the income elasticity of demand for ramen noodles is -0.2, ramen noodles are a(n) _____ good.

Accepted Answer

The income elasticity of demand for a good is negative when an increase in income leads to a decrease in demand for that good, which is characteristic of an inferior good. Thus, with an income elasticity of -0.2, ramen noodles are classified as an inferior good.

Question 16

If the income elasticity of demand for ramen noodles is 0.25, ramen noodles are a(n) _____ good.

Accepted Answer

Normal goods have an income elasticity of demand greater than 0 but less than 1, indicating that demand increases with income, but at a slower rate than income increases.

Question 17

If the cross elasticity of demand for good A with respect to good B is -4.4, then good A could be _____ and good B could be _____.

Accepted Answer

The answer of If the cross elasticity of demand for...

Question 18

If the cross elasticity of demand for good A with respect to good B is 2.3, then good A is a(n)

Accepted Answer

When the cross elasticity of demand for good A with respect to good B is positive (in this case, 2.3), it indicates that goods A and B are substitutes. This means that an increase in the price of good B leads to an increase in the demand for good A.

Question 19

If a 10% increase in income causes the quantity demanded of macaroni and cheese to fall by 5%, then macaroni and cheese is a(n) _____.

Accepted Answer

If a 10% increase in income causes the quantity demanded of a good to fall, it indicates that the good is an inferior good. People buy less of it as their income increases, preferring to purchase more desirable substitutes.

Question 20

An inferior good is a good that

Accepted Answer

Inferior goods are characterized by having a negative income elasticity of demand, meaning that as consumers' income increases, their demand for these goods decreases. This is not necessarily related to the quality or value of the good compared to others.

Quiz 5: Elasticity

If the cross elasticity of demand for two goods is positive, the two goods are _____ goods.

If the income elasticity of demand for tea is 0.50, tea is a

Suppose your income falls from $35,000 to $33,000 and that your quantity demanded of a good increases from 40 to 55 units. You consider the good to be a(n) _____ good.

If soda and potato chips are complements, then their cross elasticity of demand is

Assume that Vitamin Water and Gatorade are substitutes. Their cross elasticity of demand is

Last year, Paula's income was $15,000 and she enrolled in 12 hours of courses in college. This year, Paula's income is $35,000 and she is enrolled in 3 hours of courses in college. For Paula, college is a(n) ____ good.

A normal good has a(n)

If an increase in income of 10% causes an increase in quantity demanded of 20% for a good, the good is a(n) _____ good.

A positive cross elasticity of demand between two goods suggests that the goods are

Which of these is the MOST income elastic?

Which good is the MOST income inelastic?

Based on sales history, a retailer calculates that E_Y for frozen pizza is -0.8. Now, due to a recession, incomes in the market area are down 10%. Based on the given information, it can be estimated that frozen pizza sales will

Goods that have positive income elasticity less than 1 are _____ goods.

Goods that have income elasticity greater than 1 are _____ goods.

If the income elasticity of demand for ramen noodles is -0.2, ramen noodles are a(n) _____ good.

If the income elasticity of demand for ramen noodles is 0.25, ramen noodles are a(n) _____ good.

If the cross elasticity of demand for good A with respect to good B is -4.4, then good A could be _ and good B could be _.

If the cross elasticity of demand for good A with respect to good B is 2.3, then good A is a(n)

If a 10% increase in income causes the quantity demanded of macaroni and cheese to fall by 5%, then macaroni and cheese is a(n) _____.

An inferior good is a good that

Quiz 5: Elasticity

If the cross elasticity of demand for two goods is positive, the two goods are _____ goods.

If the income elasticity of demand for tea is 0.50, tea is a

Suppose your income falls from $35,000 to $33,000 and that your quantity demanded of a good increases from 40 to 55 units. You consider the good to be a(n) _____ good.

If soda and potato chips are complements, then their cross elasticity of demand is

Assume that Vitamin Water and Gatorade are substitutes. Their cross elasticity of demand is

Last year, Paula's income was $15,000 and she enrolled in 12 hours of courses in college. This year, Paula's income is $35,000 and she is enrolled in 3 hours of courses in college. For Paula, college is a(n) ____ good.

A normal good has a(n)

If an increase in income of 10% causes an increase in quantity demanded of 20% for a good, the good is a(n) _____ good.

A positive cross elasticity of demand between two goods suggests that the goods are

Which of these is the MOST income elastic?

Which good is the MOST income inelastic?

Based on sales history, a retailer calculates that EY for frozen pizza is -0.8. Now, due to a recession, incomes in the market area are down 10%. Based on the given information, it can be estimated that frozen pizza sales will

Goods that have positive income elasticity less than 1 are _____ goods.

Goods that have income elasticity greater than 1 are _____ goods.

If the income elasticity of demand for ramen noodles is -0.2, ramen noodles are a(n) _____ good.

If the income elasticity of demand for ramen noodles is 0.25, ramen noodles are a(n) _____ good.

If the cross elasticity of demand for good A with respect to good B is -4.4, then good A could be _____ and good B could be _____.

If the cross elasticity of demand for good A with respect to good B is 2.3, then good A is a(n)

If a 10% increase in income causes the quantity demanded of macaroni and cheese to fall by 5%, then macaroni and cheese is a(n) _____.

An inferior good is a good that

Based on sales history, a retailer calculates that E_Y for frozen pizza is -0.8. Now, due to a recession, incomes in the market area are down 10%. Based on the given information, it can be estimated that frozen pizza sales will

If the cross elasticity of demand for good A with respect to good B is -4.4, then good A could be _ and good B could be _.