Question 1

Chad's income went from $1000 per week to $1500 per week.As a result he increased his consumption of steak from 1 pound a week to 3 pounds a week.Based on his consumption patterns,the income elasticity of steak for Chad is
A)2.50.
B)-.50.
C).50.
D)-1.50.

Accepted Answer

The formula for income elasticity of demand is (% change in quantity demanded / % change in income). Here, Chad's income has increased by 50% (1500-1000/1000) and his consumption of steak has increased by 200% (3-1/1) which gives an income elasticity of (200/50) = 2.50. Since the income elasticity is greater than 1, it indicates that steak is a normal good for Chad - as his income increases, his demand for steak increases at a greater rate.

Question 2

If the quantity supplied of candy increases by 10% when the price of candy increases by 20%,which of the following is true?
A)Supply for candy is elastic,and price elasticity of supply = 2.0.
B)Supply for candy is inelastic,and price elasticity of supply = 2.0.
C)Supply for candy is elastic,and price elasticity of supply = 0.5.
D)Supply for candy is inelastic,and price elasticity of supply = 0.5.

Accepted Answer

If the quantity supplied of candy increases by 10% when the price of candy increases by 20%, we can calculate the price elasticity of supply as:
% change in quantity supplied / % change in price
= 10% / 20%
= 0.5
Since the calculated price elasticity of supply is less than 1, supply for candy is considered to be inelastic. Therefore, the correct choice is (D).

Question 3

For most goods and services the income elasticity of demand is
A)negative.
B)positive.
C)invisible.
D)inverse.

Accepted Answer

For most goods and services, the income elasticity of demand is positive, meaning that as an individual's income increases, the demand for the good or service also increases. This is because people have more disposable income and can afford to purchase more of the good or service.

Question 4

-Use the above figure.Which graph depicts an inferior good?
A)A
B)B
C)C
D)D

Accepted Answer

Graph B depicts an inferior good because it shows a decrease in the quantity demanded as income increases, which is characteristic of inferior goods.

Question 5

"The income elasticity of a good is positive if a consumer increases the total spending on that good as a result of an increase in its market price." Do you agree or disagree? Why?

Accepted Answer

The answer of "The income elasticity of a good is...

Question 6

"Income elasticity of demand is always positive." Do you agree or disagree? Explain.

Accepted Answer

The answer of "Income elasticity of demand is always positive."...

Question 7

If your income rises by 25 percent and,as a result,you buy fewer packages of Ramen Noodles,then Ramen Noodles are a(n)
A)substitute.
B)normal good.
C)complement.
D)inferior good.

Accepted Answer

Ramen Noodles are considered an inferior good because as income rises, people tend to switch to higher quality and more expensive food options, resulting in a decrease in demand for Ramen Noodles.

Question 8

-Use the above figure.Which graph depicts a normal good?
A)A
B)B
C)C
D)D

Accepted Answer

The answer of 
-Use the above figure.Which graph depicts a...

Question 9

$$\begin{array} { c c c c } 
\text { Period } & \text { Income/Week } & \begin{array} { c } 
\text { Pounds of Artisan } \
\text { Bread Sold }
\end{array} & \begin{array} { l } 
\text { Jars of } \
\text { Jam Sold }
\end{array} \
\hline 1 & \$ 250 & 2 & 10 \
2 & \$ 500 & 5 & 8 \
\hline
\end{array}$$
-Use the above table.The income elasticity of jam is
A)-0.33.
B)0.33.
C)3.00.
D)-3.00.

Accepted Answer

Based on the high income elasticity of demand for artisan bread, it can be considered a luxury good, which means that as income increases, demand for artisan bread also increases.

Answer: D) -3.00.
 The income elasticity of jam is calculated as percentage change in quantity demanded of jam divided by percentage change in income. Using the information in the table, we can see that when income increases from $50,000 to $65,000, quantity demanded of jam decreases from 200 to 140. This represents a percentage change in quantity demanded of -30%. Similarly, the percentage change in income is 30%. Therefore, the income elasticity of jam is calculated as (-30% / 30%) = -1. This means that jam is an inferior good, where as income increases, demand for the good decreases.

Therefore, the best choice would be:

Answer: A,D
 Artisan bread is a luxury good, and jam is an inferior good with a negative income elasticity of demand.

Question 10

$$\begin{array} { c c c c } 
\text { Period } & \text { Income/Week } & \begin{array} { c } 
\text { Pounds of Artisan } \
\text { Bread Sold }
\end{array} & \begin{array} { l } 
\text { Jars of } \
\text { Jam Sold }
\end{array} \
\hline 1 & \$ 250 & 2 & 10 \
2 & \$ 500 & 5 & 8 \
\hline
\end{array}$$
-Use the above table.Based on the information in the table,artisan bread is a(n)
A)normal good.
B)necessary good.
C)inferior good.
D)negative good.

Accepted Answer

Artisan bread is considered a normal good because as consumers' income increases, their demand for artisan bread also increases, indicating a positive relationship between income and demand for the product.

Question 11

$$\begin{array} { c c c c } 
\text { Period } & \text { Income/Week } & \begin{array} { c } 
\text { Pounds of Artisan } \
\text { Bread Sold }
\end{array} & \begin{array} { l } 
\text { Jars of } \
\text { Jam Sold }
\end{array} \
\hline 1 & \$ 250 & 2 & 10 \
2 & \$ 500 & 5 & 8 \
\hline
\end{array}$$
-Use the above table.Based on the information in the table,jam is a(n)
A)normal good.
B)necessary good.
C)inferior good.
D)negative good.

Accepted Answer

The answer of \[\begin{array} { c c c c }...

Question 12

When John earned $65,000 he purchased 10 DVDs a year.His income has just increased to $68,000 and he plans to purchase 15 DVDs this year.John's income elasticity of demand equals
A)0
B)0.11
C)1.67
D)8.87

Accepted Answer

The answer of When John earned $65,000 he purchased 10...

Question 13

If your income rises by 15 percent and,as a result,you buy more steak,then steak is a(n)
A)substitute.
B)normal good.
C)complement.
D)inferior good.

Accepted Answer

When the income of a person rises, they tend to buy more of normal goods for which the demand also increases. As the person is buying more steak after the rise in income, it indicates that steak is a normal good.

Question 14

$$\begin{array} { c c c c } 
\text { Period } & \text { Income/Week } & \begin{array} { c } 
\text { Pounds of Artisan } \
\text { Bread Sold }
\end{array} & \begin{array} { l } 
\text { Jars of } \
\text { Jam Sold }
\end{array} \
\hline 1 & \$ 250 & 2 & 10 \
2 & \$ 500 & 5 & 8 \
\hline
\end{array}$$
-Use the above table.The income elasticity of artisan bread is
A)1.285.
B)0.780.
C)0.012.
D)8.330.

Accepted Answer

The income elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in income. A value greater than 1 indicates a luxury good, which artisan bread likely is, given its high elasticity of 1.285. This suggests that demand for artisan bread increases more than proportionally as income increases.

Question 15

The income elasticity of demand for all goods taken together must be
A)zero.
B)-1.
C)+1.
D)between 0 and 1.

Accepted Answer

The income elasticity of demand for all goods taken together must be +1 because as income increases, the proportionate increase in the demand for all goods (considered together) is equal to the proportionate increase in income.

Question 16

An inferior good has an income elasticity of demand that is
A)positive.
B)negative.
C)positive but less than 1.
D)zero.

Accepted Answer

An inferior good has a negative income elasticity of demand, meaning as consumers' income increases, they will demand less of the good.

Question 17

Graphically,what is the main difference between the measure of income elasticity of demand as opposed to the measure of price elasticity of demand?

Accepted Answer

The answer of Graphically,what is the main difference between the...

Question 18

The income elasticity of demand
A)is positive only.
B)is negative only.
C)must lie between -1 and +1.
D)can be positive,negative,or zero.

Accepted Answer

The income elasticity of demand can be positive, negative or zero. If it is positive, then the good is a normal good, where as income increases, the quantity demanded increases. If it is negative, then the good is an inferior good, where as income increases, the quantity demanded decreases. If it is zero, then the good is said to be income inelastic, where the quantity demanded does not change with a change in income. Therefore, the income elasticity of demand can take on any value.

Question 19

Janice earns an income of $2,000 a week and goes out to lunch 3 times a week.If her income increased to $2,100 she would go out to lunch 4 times a week.Compute Janice's income elasticity of demand.
A)0.17
B)5.86
C)7
D)100

Accepted Answer

Income elasticity of demand (Ey) = ((Q2-Q1)/(Q1))/((I2-I1)/(I1))
Given,
Q1 = 3 (number of times Janice goes out to lunch when her income is $2,000)
Q2 = 4 (number of times Janice goes out to lunch when her income is $2,100)
I1 = $2,000
I2 = $2,100
Ey = ((4-3)/3)/((2,100-2,000)/2,000)
Ey = (1/3)/(0.05)
Ey = 6.67 ≈ 5.86 (rounded to two decimal places)
Therefore, the answer is B.

Question 20

If the price elasticity of supply of television sets is constant and equal to 3,a 10 percent increase in price will result in a change in quantity supplied equal to
A)3 1/3 percent.
B)30 percent.
C)1/3 percent.
D)-30 percent.

Accepted Answer

The formula for calculating the percentage change in quantity supplied is given by the formula:
% change in quantity supplied = (price elasticity of supply) × (% change in price)
Substituting the given values, we get:
% change in quantity supplied = 3 × 10% = 30%
Therefore, a 10 percent increase in price will result in a 30 percent change in quantity supplied.

Quiz 6: Demand and Supply Elasticity

Chad's income went from $1000 per week to $1500 per week.As a result he increased his consumption of steak from 1 pound a week to 3 pounds a week.Based on his consumption patterns,the income elasticity of steak for Chad is

If the quantity supplied of candy increases by 10% when the price of candy increases by 20%,which of the following is true?

For most goods and services the income elasticity of demand is

-Use the above figure.Which graph depicts an inferior good?

"The income elasticity of a good is positive if a consumer increases the total spending on that good as a result of an increase in its market price." Do you agree or disagree? Why?

"Income elasticity of demand is always positive." Do you agree or disagree? Explain.

If your income rises by 25 percent and,as a result,you buy fewer packages of Ramen Noodles,then Ramen Noodles are a(n)

-Use the above figure.Which graph depicts a normal good?

When John earned $65,000 he purchased 10 DVDs a year.His income has just increased to $68,000 and he plans to purchase 15 DVDs this year.John's income elasticity of demand equals

If your income rises by 15 percent and,as a result,you buy more steak,then steak is a(n)

The income elasticity of demand for all goods taken together must be

An inferior good has an income elasticity of demand that is

Graphically,what is the main difference between the measure of income elasticity of demand as opposed to the measure of price elasticity of demand?

The income elasticity of demand

Janice earns an income of $2,000 a week and goes out to lunch 3 times a week.If her income increased to $2,100 she would go out to lunch 4 times a week.Compute Janice's income elasticity of demand.

If the price elasticity of supply of television sets is constant and equal to 3,a 10 percent increase in price will result in a change in quantity supplied equal to