Question 1

You and your college roommate eat three packages of Ramen noodles each week.After graduation last month,both of you were hired at several times your college income.Your roommate still enjoys Ramen noodles very much and buys even more,but you plan to buy fewer Ramen noodles in favor of foods you prefer more.When looking at income elasticity of demand for Ramen noodles,

Accepted Answer

Yours would be negative because as your income increases, you plan to buy fewer Ramen noodles. Your roommate's would be positive because as their income increases, they plan to buy even more Ramen noodles.

Question 2

Which of the following could be the cross-price elasticity of demand for two goods that are complements?

Accepted Answer

The answer of Which of the following could be the...

Question 3

To determine whether a good is considered normal or inferior,one could examine the value of the

Accepted Answer

The income elasticity of demand measures the responsiveness of the quantity demanded to a change in income. Normal goods have a positive income elasticity of demand, meaning that as income increases, demand for the good also increases. Inferior goods, on the other hand, have a negative income elasticity of demand, meaning that as income increases, demand for the good decreases. Therefore, by examining the income elasticity of demand for a good, one can determine whether it is normal or inferior.

Question 4

Table 5-5
 
-Refer to Table 5-5.Using the midpoint method,the income elasticity of demand for good Y is

Accepted Answer

The answer of Table 5-5
 
-Refer to Table 5-5.Using the...

Question 5

Suppose good X has a negative income elasticity of demand.This implies that good X is

Accepted Answer

A negative income elasticity of demand means that as income increases, the demand for the good decreases. This is characteristic of inferior goods, which are goods that people buy less of as their income increases and they can afford better substitutes. Therefore, the best choice is (C) an inferior good.

Question 6

Muriel's income elasticity of demand for football tickets is 1.50.All else equal,this means that if her income increases by 20 percent,she will buy

Accepted Answer

The answer of Muriel's income elasticity of demand for football...

Question 7

Suppose that when the price of good X falls from $10 to $8,the quantity demanded of good Y rises from 20 units to 25 units.Using the midpoint method,

Accepted Answer

The answer of Suppose that when the price of good...

Question 8

Which of the following should be held constant when calculating an income elasticity of demand?

Accepted Answer

When calculating income elasticity of demand, all factors that can affect demand must be held constant to determine the change in demand solely based on income. Therefore, the price of the good, prices of related goods, and tastes should all be held constant.

Question 9

Which of the following should be held constant when calculating an income elasticity of demand?

Accepted Answer

Income elasticity of demand measures the responsiveness of demand for a good or service to a change in income, while holding all other factors constant. Therefore, the quantity of the good demanded and income should change, while the price of the good should be held constant.

Question 10

Suppose goods A and B are substitutes for each other.We would expect the cross-price elasticity between these two goods to be

Accepted Answer

Cross-price elasticity is the measure of responsiveness of the quantity demanded of one good to the change in the price of another good. If two goods are substitutes, an increase in the price of one good will lead to an increase in the demand for the other good. Therefore, the cross-price elasticity between these two goods will be positive.

Question 11

When her income increased from $10,000 to $20,000,Heather's consumption of macaroni decreased from 10 pounds to 5 pounds and her consumption of soy-burgers increased from 2 pounds to 4 pounds.We can conclude that for Heather,

Accepted Answer

Macaroni is an inferior good because its consumption decreased as income increased, indicating a negative income elasticity. Soy-burgers are normal goods because their consumption increased with income, indicating a positive income elasticity.

Question 12

Last month,sellers of good Y took in $100 in total revenue on sales of 50 units of good Y.This month sellers of good Y raised their price and took in $120 in total revenue on sales of 40 units of good Y.At the same time,the price of good X stayed the same,but sales of good X increased from 20 units to 40 units.We can conclude that goods X and Y are

Accepted Answer

The answer of Last month,sellers of good Y took in...

Question 13

Table 5-5
 
-Refer to Table 5-5.Using the midpoint method,what is the income elasticity of demand for good X?

Accepted Answer

The answer of Table 5-5
 
-Refer to Table 5-5.Using the...

Question 14

If an increase in income results in a decrease in the quantity demanded of a good,then for that good,the

Accepted Answer

When an increase in income results in a decrease in the quantity demanded of a good, it means that the good is an inferior good. Inferior goods have a negative income elasticity of demand, which means that as income increases, demand for the good decreases. Therefore, the correct answer is C.

Question 15

Assume that a 4 percent increase in income results in a 2 percent increase in the quantity demanded of a good.The income elasticity of demand for the good is

Accepted Answer

Since a 4% increase in income results in a 2% increase in quantity demanded, the income elasticity of demand would be 2%/4% = 0.5, which is positive. Thus, the good is a normal good, meaning that as income increases, the quantity demanded of the good also increases.

Question 16

Food and clothing tend to have

Accepted Answer

Food and clothing are considered basic necessities, and consumers tend to purchase relatively constant quantities of these goods regardless of changes in their income levels. Therefore, their income elasticities tend to be small.

Question 17

For which of the following types of goods would the income elasticity of demand be positive and relatively large?

Accepted Answer

Luxuries are goods that are not necessary for survival and are typically associated with higher income levels. As income increases, people have more disposable income to spend on these goods, leading to a positive and relatively large income elasticity of demand.

Question 18

Assume that a 4 percent decrease in income results in a 6 percent increase in the quantity demanded of a good.The income elasticity of demand for the good 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, it is -6% / 4% = -1.5, which is negative, indicating that the good is an inferior good.

Question 19

The income elasticity of demand for caviar tends to be

Accepted Answer

The answer of The income elasticity of demand for caviar...

Question 20

You and your college roommate eat three packages of Ramen noodles each week.After graduation last month,both of you were hired at several times your college income.You still enjoy Ramen noodles very much and buy even more,but your roommate plans to buy fewer Ramen noodles in favor of foods she prefers more.When looking at income elasticity of demand for Ramen noodles,

Accepted Answer

Income elasticity of demand is the degree of responsiveness in demand for a good or service relative to changes in income. As you and your roommate were hired at several times your college income, it is safe to assume that your income has increased. Since you still enjoy Ramen noodles very much and buy even more, your demand for Ramen noodles would be positively elastic. On the other hand, your roommate plans to buy fewer Ramen noodles in favor of foods she prefers more, which means her demand for Ramen noodles would be negatively elastic. Therefore, the correct answer is (B) yours would be positive and your roommate's would be negative.

Quiz 5: Elasticity and Its Application

Which of the following could be the cross-price elasticity of demand for two goods that are complements?

To determine whether a good is considered normal or inferior,one could examine the value of the

Table 5-5 -Refer to Table 5-5.Using the midpoint method,the income elasticity of demand for good Y is

Suppose good X has a negative income elasticity of demand.This implies that good X is

Muriel's income elasticity of demand for football tickets is 1.50.All else equal,this means that if her income increases by 20 percent,she will buy

Suppose that when the price of good X falls from $10 to $8,the quantity demanded of good Y rises from 20 units to 25 units.Using the midpoint method,

Which of the following should be held constant when calculating an income elasticity of demand?

Which of the following should be held constant when calculating an income elasticity of demand?

Suppose goods A and B are substitutes for each other.We would expect the cross-price elasticity between these two goods to be

When her income increased from $10,000 to $20,000,Heather's consumption of macaroni decreased from 10 pounds to 5 pounds and her consumption of soy-burgers increased from 2 pounds to 4 pounds.We can conclude that for Heather,

Table 5-5 -Refer to Table 5-5.Using the midpoint method,what is the income elasticity of demand for good X?

If an increase in income results in a decrease in the quantity demanded of a good,then for that good,the

Assume that a 4 percent increase in income results in a 2 percent increase in the quantity demanded of a good.The income elasticity of demand for the good is

Food and clothing tend to have

For which of the following types of goods would the income elasticity of demand be positive and relatively large?

Assume that a 4 percent decrease in income results in a 6 percent increase in the quantity demanded of a good.The income elasticity of demand for the good is

The income elasticity of demand for caviar tends to be