MBA 651 - Quiz #2

The cross price elasticity of demand between goods X and Y is -3.5. If the price of X decreases by 7%, the quantity demanded of Y will:

increase by 24.5%.

The demand for food (a broad group) is more

inelastic than the demand for beef (specific commodity).

We would expect the demand for jeans to be:

more elastic than the demand for clothing

The demand for women's clothing is

more elastic than the demand for clothing in general.

Demand is perfectly elastic when the absolute value of the own price elasticity of demand is:

zero.

Each week Bill buys exactly 7 bottles of cola regardless of its price. Bill's own price elasticity of demand for cola in absolute value is:

zero.

If quantity demanded for sneakers falls by 6% when price increases 20% we know that the absolute value of the own-price elasticity of sneakers is

0.3

If quantity demanded for sneakers falls by 10% when price increases 25% we know that the absolute value of the own-price elasticity of sneakers is:

0.4

If the price of pork chops falls from $8 to $6, and this leads to an increase in demand for apple sauce from 100 to 140 jars, what is the cross price-elasticity of apple sauce and pork chops at a pork chop price of $6?

-.1.17.

Suppose Q xd = 10,000 - 2 Px + 3 Py - 4.5M , where Px = $100, Py = $50, and M = $2,000. What is the own-price elasticity of demand?

-.21.

The demand for good X is estimated to be Q xd = 10,000 - 4PX + 5PY + 2M + AX, where PXis the price of X, PY is the price of good Y, M is income and AX is the amount of advertising on X. Suppose the present price of good X is $50, PY = $100, M = $25,000, and AX = 1,000 units. What is the own-price elasticity of demand for good X?

-0.003.

The demand for good X is estimated to be Q xd = 10,000 - 4PX + 5PY + 2M + AX, where PXis the price of X, PY is the price of good Y, M is income and AX is the amount of advertising on X. Suppose the present price of good X is $50, PY = $100, M = $25,000, and AX = 1,000 units. Based on this information, the cross price elasticity between goods X and Y is

0.008.

You are the manager of a popular shoe company. You know that the advertising elasticity of demand for your product is .15. How much will you have to increase advertising in order to increase demand by 10%?

66.7%.

The demand for which of the following commodities is likely to be more inelastic?

Beverages.

The demand for video recorders has been estimated to linear and given by the demand relation Qv = 145 - 3.2Pv + 7M - .95Pf - 39Pm, where Qv is the quantity of video recorders, Pf denotes the price of video recorder film, Pm is the price of attending a movie, Pv is the price of video recorders, and M is income. Based on the estimated demand equation we can conclude:

a and b.

Which of the following measures of fit penalizes a researcher for estimating many coefficients with relatively little data?

adjusted R-square.

When a demand curve is linear,

demand is elastic at high prices.

A study has estimated the effect of changes in interest rates and consumer confidence on the demand for money to be: lnM = 14.666 + .021 lnC - .036 lnr, where M denotes real money balances, C is an index of consumer confidence, and r is the interest rate paid on bank deposits. Based on this study, a 5% increase in interest rates will cause the demand for money to:

drop by .18%.

Which of the following is not the important factor that affects the magnitude of the own price elasticity of a good?

supply of the good.

If the own price elasticity of demand is infinite in absolute value, then

the demand curve is horizontal.