Question 1

If the income elasticity for canned food is 0.8,then canned food is an inferior good.

Accepted Answer

If the income elasticity for canned food is positive but less than 1, it indicates that canned food is a normal good, as its demand increases with an increase in income but at a slower rate than income. If the income elasticity is negative, it would indicate that canned food is an inferior good. However, an income elasticity of 0.8 indicates that canned food is still a normal good.

Question 2

The absolute value of the price elasticity of demand for telescopes is 1.5.Therefore,telescopes can be classified as a luxury.

Accepted Answer

The answer of The absolute value of the price elasticity...

Question 3

Suppose the cross-price elasticity of demand between DVDs at Amazon.com and DVDs at Buy.com is 3.5.Based on this information,predict what happens when Amazon.com lowers its DVD prices by 10 percent.
A)The quantity of DVDs demanded on Amazon.com will increase by 35 percent.
B)The quantity of DVDs demanded on Buy.com will increase by 35 percent.
C)The quantity of DVDs demanded on Amazon.com will decrease by 35 percent.
D)The quantity of DVDs demanded on Buy.com will decrease by 35 percent.

Accepted Answer

The answer of Suppose the cross-price elasticity of demand between...

Question 4

A recent study indicated that "Stricter college alcohol policies such as raising the price of alcohol,or banning alcohol on campus,decreases the number of students who use marijuana." This indicates that the cross-price elasticity between alcohol and marijuana is positive.

Accepted Answer

The answer of A recent study indicated that "Stricter college...

Question 5

Economists estimated that the cross-price elasticity of demand for beer and wine is 0.31 and the income elasticity of wine is 5.03.This means that
A)beer and wine are substitutes and wine is an inferior good.
B)beer and wine are complements and wine is a luxury good.
C)beer and wine are substitutes and wine is a luxury good.
D)beer and wine are complements and wine is an inferior good.

Accepted Answer

The positive cross-price elasticity of demand suggests that beer and wine are substitutes, meaning that a rise in the price of beer will increase the demand for wine. Additionally, the high income elasticity of demand for wine indicates that it is a luxury good, as consumers are willing to purchase more of it as their income rises. Therefore, beer and wine are substitutes and wine is a luxury good.

Question 6

From 1950 to 2011 the number of people who lived on farms fell from 23 million to fewer than 3 million? Which of the following factors have contributed to this trend?
A)increases in the cost of farming and a desire for young adults to move to urban areas
B)rapid growth in farm production and low income and price elasticities for food products
C)slow growth in agricultural productivity and low income elasticities for food products
D)government policies that have increased the cost of living and working on farms

Accepted Answer

The rapid growth in farm production has led to fewer people needed on farms, while low income and price elasticities for food products mean that demand doesn't increase significantly with income, reducing the need for a larger farming population.

Question 7

When the price of Starbucks coffee increased by 8 percent,the quantity demanded of Peets coffee increased by 10 percent.Calculate the cross price elasticity of demand between Starbucks coffee and Peets coffee.What is the relationship between the two products?

Accepted Answer

The answer of When the price of Starbucks coffee increased...

Question 8

Between 1950 and 2011 the productivity of wheat farmers in the United States more than doubled.This means that
A)the amount of land and other resources devoted to wheat production more than doubled.
B)the incomes of wheat farmers more than doubled.
C)the total amount of wheat produced more than doubled.
D)the amount of wheat produced by the average farmer more than doubled.

Accepted Answer

Productivity refers to the amount of output per unit of input or resource. In this case, the productivity of wheat farmers doubled, meaning that the amount of wheat produced per farmer increased. This does not necessarily mean that more resources or land were used or that farmers' incomes increased.

Question 9

Explain the concepts of cross-price elasticity of demand and income elasticity of demand.What do positive and negative values indicate for each of these demand elasticities

Accepted Answer

The answer of Explain the concepts of cross-price elasticity of...

Question 10

The paradox of American farming is
A)the demand for imported luxury food products has risen as the demand for domestic food products has fallen.
B)the demand for food has risen as the number of people who pursue farming as a career has fallen.
C)food has become cheaper and more abundant as the number of farms has decreased.
D)the amount of food produced has increased as the average farm size has fallen.

Accepted Answer

The answer of The paradox of American farming is
A)the demand...

Question 11

Economists have estimated that the cross-price elasticity of demand between beer and spirits is 0.15,the income elasticity for spirits is 1.21 and the income elasticity for wine is 5.03.These elasticities mean that
A)beer and spirits are complements,spirits and wine are luxuries.
B)beer and spirits are normal goods,spirits and wine are luxuries.
C)beer and spirits are complements,spirits are substitutes.
D)beer and spirits are substitutes,spirits and wine are luxuries.

Accepted Answer

The positive cross-price elasticity of 0.15 indicates that beer and spirits are substitutes. The income elasticity values greater than 1 for spirits (1.21) and wine (5.03) classify them as luxury goods.

Question 12

Which of the following pairs of goods is likely to have a negative cross-price elasticity of demand?
A)pancakes and syrup
B)hot dogs and hamburgers
C)orange juice and grapefruit juice
D)peanuts and cat food

Accepted Answer

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

Question 13

Table 6-4
 
-Refer to Table 6-4.
a.Using the information in the table,calculate the income elasticity of demand for good X and characterize the good.Use the midpoint formula.
b.Can you calculate the income elasticity of demand for good Y? If you can,show your calculation and characterize the good.If you cannot,explain why.

Accepted Answer

The answer of Table 6-4
 
-Refer to Table 6-4.
a.Using the...

Question 14

For people who live near a bus route,a subway station,or a commuter rail line,public transportation provides a substitute to driving their own cars.So,for these people,the ________ between gasoline and public transportation is positive.
A)income elasticity of demand
B)price elasticity of demand
C)cross-price elasticity of demand
D)price elasticity of supply

Accepted Answer

Cross-price elasticity of demand measures the responsiveness of demand for one good or service to a change in the price of another good or service. In this case, the price of gasoline and the price of public transportation are complementary goods, meaning they are consumed together, and a decrease in the price of one will increase the demand for the other. Therefore, the cross-price elasticity of demand between gasoline and public transportation is positive.

Question 15

Studies show that the income elasticity of demand for wine is 5.03 and the income elasticity of demand for spirits is 1.21.This indicates that
A)wine and spirits are luxury goods.
B)wine is a luxury good and spirits are inferior goods.
C)wine and spirits are highly price elastic.
D)wine is a luxury good and spirits are necessities.

Accepted Answer

An income elasticity of demand greater than 1 (in this case 5.03 for wine and 1.21 for spirits) indicates that both wine and spirits are luxury goods, as an increase in income leads to a greater than proportionate increase in demand for these goods.

Question 16

If the cross-price elasticity of demand for goods A and B is zero,this means the two goods are unrelated.

Accepted Answer

If the cross-price elasticity of demand is zero, it means that a change in the price of one good has no effect on the demand for the other good. In other words, the two goods are not substitutes nor complements, but rather unrelated.

Question 17

Barbara,the consummate hostess,proudly announced as she served dessert,"A port is often the perfect end to a meal,sipped with a piece of my scrumptious chocolate cake." Evidently,Barbara views
A)port and chocolate cake as luxury items.
B)port and chocolate cake as necessities.
C)port and chocolate cake as complementary goods.
D)port and chocolate cake as substitutes to other desserts.

Accepted Answer

Barbara views port and chocolate cake as complementary goods, meaning they are often consumed together and enhance the enjoyment of each other. She suggests that sipping port with a piece of her chocolate cake is the perfect way to end a meal.

Question 18

When the price of tortilla chips rose by 10 percent,the quantity of tortilla chips sold fell 4 percent,and the sale of dips (like salsa and bean dip)fell 8 percent.This set of facts indicates that
A)the cross-price elasticity between tortilla chips and dips is 0.8,so the two are substitutes.
B)the cross-price elasticity between tortilla chips and dips is -0.4,so the two are complements.
C)the cross-price elasticity between tortilla chips and dips is -0.8,so the two are complements.
D)the cross-price elasticity between tortilla chips and dips is 0.4,so the two are substitutes.

Accepted Answer

The fact that the price of tortilla chips rose by 10 percent and the sales of dips fell by 8 percent indicates that the two products are complements. If they were substitutes, we would expect the sales of dips to increase as customers switch from tortilla chips to dips when the price of tortilla chips rises. The formula used to calculate cross-price elasticity of demand is (% change in quantity of good Y)/(% change in price of good X). Using the given numbers, we get (-8%)/(+10%) = -0.8, indicating that the two goods are complements. Therefore, the best choice is C.

Question 19

Since 1950 there has been a substantial increase in wheat production.The increase in production has led to a decrease in the price of wheat because of which of the following factors?
A)The absolute value of the price elasticity of demand for wheat is less than 1 and the income elasticity of demand for wheat is greater than 1.
B)The absolute value of the price elasticity of demand for wheat is greater than 1 and wheat is a close substitute for other food products.
C)The absolute value of the price elasticity of demand for wheat is less than 1 and the income elasticity of demand for wheat is low.
D)The income elasticity of demand for wheat is high and wheat is an inferior good.

Accepted Answer

The answer of Since 1950 there has been a substantial...

Question 20

During an economic expansion as consumer incomes rise,holding everything else constant,
A)the demand for most goods,except luxuries,will rise.
B)the demand for luxuries will rise while the demand for inferior goods will fall.
C)the demand for luxuries and inferior goods will rise.
D)the prices of luxuries will fall while the prices of inferior goods will rise.

Accepted Answer

The answer of During an economic expansion as consumer incomes...

Quiz 6: Elasticity: the Responsiveness of Demand and Supply

If the income elasticity for canned food is 0.8,then canned food is an inferior good.

The absolute value of the price elasticity of demand for telescopes is 1.5.Therefore,telescopes can be classified as a luxury.

Suppose the cross-price elasticity of demand between DVDs at Amazon.com and DVDs at Buy.com is 3.5.Based on this information,predict what happens when Amazon.com lowers its DVD prices by 10 percent.

A recent study indicated that "Stricter college alcohol policies such as raising the price of alcohol,or banning alcohol on campus,decreases the number of students who use marijuana." This indicates that the cross-price elasticity between alcohol and marijuana is positive.

Economists estimated that the cross-price elasticity of demand for beer and wine is 0.31 and the income elasticity of wine is 5.03.This means that

From 1950 to 2011 the number of people who lived on farms fell from 23 million to fewer than 3 million? Which of the following factors have contributed to this trend?

When the price of Starbucks coffee increased by 8 percent,the quantity demanded of Peets coffee increased by 10 percent.Calculate the cross price elasticity of demand between Starbucks coffee and Peets coffee.What is the relationship between the two products?

Between 1950 and 2011 the productivity of wheat farmers in the United States more than doubled.This means that

Explain the concepts of cross-price elasticity of demand and income elasticity of demand.What do positive and negative values indicate for each of these demand elasticities

The paradox of American farming is

Economists have estimated that the cross-price elasticity of demand between beer and spirits is 0.15,the income elasticity for spirits is 1.21 and the income elasticity for wine is 5.03.These elasticities mean that

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

For people who live near a bus route,a subway station,or a commuter rail line,public transportation provides a substitute to driving their own cars.So,for these people,the ________ between gasoline and public transportation is positive.

Studies show that the income elasticity of demand for wine is 5.03 and the income elasticity of demand for spirits is 1.21.This indicates that

If the cross-price elasticity of demand for goods A and B is zero,this means the two goods are unrelated.

Barbara,the consummate hostess,proudly announced as she served dessert,"A port is often the perfect end to a meal,sipped with a piece of my scrumptious chocolate cake." Evidently,Barbara views

When the price of tortilla chips rose by 10 percent,the quantity of tortilla chips sold fell 4 percent,and the sale of dips (like salsa and bean dip) fell 8 percent.This set of facts indicates that

Since 1950 there has been a substantial increase in wheat production.The increase in production has led to a decrease in the price of wheat because of which of the following factors?

During an economic expansion as consumer incomes rise,holding everything else constant,