Chapter 5 Econ

Last year, Jim bought 8 tickets to sporting events when his income was $30,000. This year, his income is $33,000, and he purchased 10 tickets to sporting events. Holding other factors constant and using the midpoint method, it follows that Jim's income elasticity of demand is about

2.33, and Jim regards tickets to sporting events as normal goods.

Suppose the price of a bag of frozen chicken nuggets decreases from $6.50 to $5.75 and, as a result, the quantity of bags demanded increases from 600 to 800. Using the midpoint method, the price elasticity of demand for frozen chicken nuggets in the given price range is

2.33.

Refer to Figure 5-12. Using the midpoint method, the price elasticity of demand between point X and point Y is

2.5.

Which of the following is likely to have the most price elastic demand?

Häagen-Dazs® vanilla bean ice cream

Suppose good X has a positive income elasticity of demand. This implies that good X could be (i) a normal good. (ii) a necessity. (iii) an inferior good. (iv) a luxury.

(i), (ii), and (iv) only

Refer to Table 5-5. As price rises from $5 to $6, the price elasticity of demand using the midpoint method is approximately

0.41.

The following table shows a portion of the demand schedule for a particular good at various levels of income. Refer to Table 5-7. Using the midpoint method, when income equals $5,000, what is the price elasticity of demand between $8 and $12?

0.56

Refer to Table 5-5. As price rises from $7 to $8, the price elasticity of demand using the midpoint method is approximately

0.65.

The following table shows a portion of the demand schedule for a particular good at various levels of income. Refer to Table 5-7. Using the midpoint method, when income equals $7,500, what is the price elasticity of demand between $16 and $20?

1.80

Using the midpoint method, the price elasticity of demand for a good is computed to be approximately 0.75. Which of the following events is consistent with a 10 percent decrease in the quantity of the good demanded?

a 13.33 percent increase in the price of the good

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

an inferior good.

If the cross-price elasticity of two goods is negative, then the two goods are

complements.

Holding all other forces constant, if decreasing the price of a good leads to an increase in total revenue, then the demand for the good must be

elastic.

If two goods are substitutes, their cross-price elasticity will be

positive.

The price elasticity of demand for mobile phones

will be lower if consumers perceive mobile phones to be a necessity.

Refer to Table 5-1. Which of the following is consistent with the elasticities given in Table 5-1?

A is an airline ticket from Chicago to New York demanded by a vacationer and B is an airline ticket from Chicago to New York demanded by a business traveler.

The price elasticity of demand for bread

All of the above are correct.

Which of the following is likely to have the most price elastic demand?

Tommy Hilfiger jeans

Demand is said to be price elastic if

buyers respond substantially to changes in the price of the good.

Refer to Figure 5-11. A decrease in price from $20 to $10 leads to a

decrease in total revenue of $120, so the price elasticity of demand is less than 1 in this price range.

Holding all other forces constant, if decreasing the price of a good leads to a decrease in total revenue, then the demand for the good must be

inelastic.

Holding all other forces constant, if increasing the price of a good leads to an increase in total revenue, then the demand for the good must be

inelastic.

When the price of candy bars is $1.00, the quantity demanded is 500 per day. When the price falls to $0.80, the quantity demanded increases to 600. Given this information and using the midpoint method, we know that the demand for candy bars is

inelastic.

Goods with many close substitutes tend to have

more elastic demands.

Which of the following is likely to have the most price elastic demand?

music downloads

The smaller the price elasticity of demand, the

smaller the responsiveness of quantity demanded to a change in price.

If the cross-price elasticity of two goods is positive, then the two goods are

substitutes.

Income elasticity of demand measures how

the quantity demanded changes as consumer income changes.

Demand is said to be inelastic if

the quantity demanded changes only slightly when the price of the good changes.

If the cross-price elasticity of demand for two goods is 1.25, then

the two goods are substitutes.