Question 1

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 for goods A and B is zero, it means that a change in the price of good B does not affect the demand for good A, and vice versa. This does not necessarily mean that the two goods are completely unrelated, as they could still be complementary or substitutes for other goods.

Question 2

In order to prove that Motrin and Ibuprofen are substitutes,one should measure the ________ and get a ________.
A) cross-price elasticity; positive number
B) cross-price elasticity; negative number
C) price elasticity of demand; number greater than 1 (in absolute value)
D) price elasticity of demand; number less than 1 (in absolute value)

Accepted Answer

Cross-price elasticity measures the responsiveness of demand for one good to changes in the price of another good. If Motrin and Ibuprofen are substitutes, then an increase in the price of Motrin should lead to an increase in demand for Ibuprofen, resulting in a positive cross-price elasticity.

Question 3

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 4

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 5

In recent years,the prices of new domestically produced cars have been falling.Suppose consumers respond by reducing their demand for used cars and mass transport services such as bus travel.This information suggests that the cross-price elasticity between new cars and used cars,and the cross-price elasticity between new cars and bus travel are negative.

Accepted Answer

The answer of In recent years,the prices of new domestically...

Question 6

Consider the following pairs of items: 
a.shampoo and conditioner
b.iPhones and earbuds
c.a laptop computer and a desktop computer
d.beef and pork
e.air-travel and weed killer
Which of the pairs listed will have a positive cross-price elasticity?
A) a and b only
B) c and d only
C) e only
D) a, b, and c only

Accepted Answer

The answer of Consider the following pairs of items: 
a.shampoo...

Question 7

The cross-price elasticity of demand between Coca-Cola and Pepsi-Cola is calculated by dividing
A) the percentage change in quantity demanded of Coca-Cola by the percentage change in the quantity demanded of Pepsi-Cola.
B) the percentage change in the price of Pepsi-Cola by the percentage change in quantity demanded of Coca-Cola.
C) the percentage change in the price of Coca-Cola by the percentage change in the price of Pepsi-Cola.
D) the percentage change in the quantity demanded of Coca-Cola by the percentage change in the price of Pepsi-Cola.

Accepted Answer

The answer of The cross-price elasticity of demand between Coca-Cola...

Question 8

The cross-price elasticity between Gillette razors and a related good is -3.4.What happens to the demand for the related good if the price of Gillette razors falls by 10 percent?
A) The quantity demanded of the related good rises by 3.4 percent.
B) The quantity demanded of the related good falls by 34 percent.
C) The quantity demanded of the related good rises by 34 percent.
D) The quantity demanded of the related good falls by 3.4 percent.

Accepted Answer

The negative cross-price elasticity (-3.4) indicates that the related good is a complement to Gillette razors, meaning that they are used together. When the price of Gillette razors falls by 10 percent, the quantity demanded of Gillette razors is likely to increase. As a result, the demand for the related good will also increase, and by the same percentage as the absolute value of the cross-price elasticity (-3.4), which is 34 percent. Therefore, the correct answer is C.

Question 9

Economists have estimated that the cross-price elasticity of demand between beer and spirits is -0.50,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 answer of Economists have estimated that the cross-price elasticity...

Question 10

In the alcohol industry,both wine and spirits are considered to be substitutes for beer.

Accepted Answer

The answer of In the alcohol industry,both wine and spirits...

Question 11

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

Accepted Answer

If the income elasticity of a good is positive, it is a normal good. If the income elasticity is negative, it is an inferior good. Since the income elasticity for canned food is 0.8 which is positive, it is a normal good.

Question 12

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

A high income elasticity of demand (greater than 1) indicates that the good is a luxury good, meaning that as income increases, consumers will demand more of it. Both wine and spirits have income elasticities greater than 1, indicating that they are both luxury goods. However, wine has a higher income elasticity of demand, which suggests that it is a more luxurious product than spirits.

Question 13

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...

Question 14

Demand for staples such as dairy products and bread is likely to be both income and price inelastic.

Accepted Answer

Staples such as dairy products and bread are necessities for many households and people are likely to continue to buy these items even if the price increases or their income decreases, thus making the demand for these goods both income and price inelastic.

Question 15

If the cross-price elasticity of demand between beer and wine is 0.31,then beer and wine are
A) complements.
B) price inelastic goods.
C) substitutes.
D) necessities.

Accepted Answer

A positive cross-price elasticity of demand implies that the two goods are substitutes. A cross-price elasticity of demand of 0.31 indicates that beer and wine are moderately related substitutes.

Question 16

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 quantity of tortilla chips sold falls by a lesser percentage (4%) than the price increase (10%) indicates that the demand for tortilla chips is relatively inelastic. The fact that the sale of dips (a complement to tortilla chips) fell by 8% indicates that tortilla chips and dips are complements. Therefore, the cross-price elasticity of demand between tortilla chips and dips is negative, and given the complementary relationship between the two goods, we can infer that the magnitude of the elasticity is likely to be relatively high. Option C (cross-price elasticity of -0.8) is the only one that meets these criteria.

Question 17

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 18

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's statement implies that she sees port and chocolate cake as complementary goods, meaning they are often consumed together and enhance each other's enjoyment.

Question 19

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 20

Economists estimated that the cross-price elasticity of demand for beer and wine is -0.83 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 answer of Economists estimated that the cross-price elasticity of...

Quiz 6: Elasticity: The Responsiveness of Demand and Supply

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

In order to prove that Motrin and Ibuprofen are substitutes,one should measure the and get a .

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.

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

Consider the following pairs of items: a.shampoo and conditioner b.iPhones and earbuds c.a laptop computer and a desktop computer d.beef and pork e.air-travel and weed killer Which of the pairs listed will have a positive cross-price elasticity?

The cross-price elasticity of demand between Coca-Cola and Pepsi-Cola is calculated by dividing

The cross-price elasticity between Gillette razors and a related good is -3.4.What happens to the demand for the related good if the price of Gillette razors falls by 10 percent?

Economists have estimated that the cross-price elasticity of demand between beer and spirits is -0.50,the income elasticity for spirits is 1.21 and the income elasticity for wine is 5.03.These elasticities mean that

In the alcohol industry,both wine and spirits are considered to be substitutes for beer.

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

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

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

Demand for staples such as dairy products and bread is likely to be both income and price inelastic.

If the cross-price elasticity of demand between beer and wine is 0.31,then beer and wine are

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

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

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

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.

Economists estimated that the cross-price elasticity of demand for beer and wine is -0.83 and the income elasticity of wine is 5.03.This means that