Micro Exam 1

Denise values a stainless steel dishwasher for her new house at $500, but she succeeds in buying one for $350. Denise's consumer surplus is...

$150 (500-350)

If a 20% change in price results in a 15% change in quantity supplied, then the price elasticity of supply is about a. 1.33, and supply is elastic. b. 1.33, and supply is inelastic. c. 0.75, and supply is elastic. d. 0.75, and supply is inelastic.

A. (1.33, and supply is elastic.)

When demand is inelastic, an increase in price will cause a. an increase in total revenue. b. a decrease in total revenue. c. no change in total revenue but an increase in quantity demanded. d. no change in total revenue but a decrease in quantity demanded.

A. (an increase in total revenue)

Consider the market for portable air conditioners in equilibrium. A summer of unseasonably cool weather would cause a. both the equilibrium price and quantity to decrease. b. both the equilibrium price and quantity to increase. c. the equilibrium price to increase and the equilibrium quantity to decrease. d. the equilibrium price to decrease and the equilibrium quantity to increase.

A. (both the equilibrium price and quantity to decrease.)

Two types of private solutions to the problem of externalities are a. charities and the Golden Rule. b. charities and subsidies. c. the Golden Rule and taxes. d. taxes and subsidies.

A. (charities and the Golden Rule.)

The price elasticity of demand for a good measures the willingness of... a. consumers to buy less of the good as price rises. b. consumers to avoid monopolistic markets in favor of competitive markets. c. firms to produce more of a good as price rises. d. firms to respond to the tastes of consumers.

A. (consumers to buy less of the good as price rises.)

Relative to a situation in which gasoline is not taxed, the imposition of a tax on gasoline causes the quantity of gasoline demanded to a. decrease and the quantity of gasoline supplied to decrease. b. decrease and the quantity of gasoline supplied to increase. c. increase and the quantity of gasoline supplied to decrease. d. increase and the quantity of gasoline supplied to increase.

A. (decrease and the quantity of gasoline supplied to decrease.)

When studying how some event or policy affects a market, elasticity provides information on the A. direction and magnitude of the effect B. change in the cost of production C. effect on the budget deficit or surplus D. tradeoff between equality and efficiency

A. (direction and magnitude of the effect)

When small changes in price lead to infinite changes in quantity demanded, demand is perfectly a. elastic, and the demand curve will be horizontal. b. inelastic, and the demand curve will be horizontal. c. elastic, and the demand curve will be vertical. d. inelastic, and the demand curve will be vertical.

A. (elastic, and the demand curve will be horizontal.)

The goal of industrial policy should be that a. industries yielding the largest positive externalities should receive the biggest subsidies. b. any industry that produces negative externalities should be heavily taxed. c. any production process that produces negative externalities should be shut down. d. all industries that produce positive externalities should be equally subsidized.

A. (industries yielding the largest positive externalities should receive the biggest subsidies.)

Externalities tend to cause markets to be a. inefficient. b. unequitable. c. unnecessary. d. overwhelmed.

A. (inefficient)

Public policies a. may be able to improve either economic efficiency or equality. b. may be able to improve economic efficiency but cannot improve equality. c. may be able to improve equality but cannot improve economic efficiency. d. cannot improve either equality or economic efficiency.

A. (may be able to improve either economic efficiency or equality.)

The use of theory and observation is more difficult in economics than in sciences such as physics due to the difficulty in a. performing an experiment in an economic system. b. applying mathematical methods to economic analysis. c. analyzing available data. d. formulating theories about economic events

A. (performing an experiment in an economic system.)

The imposition of a binding price ceiling on a market causes a. quantity demanded to be greater than quantity supplied. b. quantity demanded to be less than quantity supplied. c. quantity demanded to be equal to quantity supplied. d. the price of the good to be greater than its equilibrium price

A. (quantity demanded to be greater than quantity supplied.)

Which of the following is not an effective method of reducing negative externalities? a. relying on voluntary compliance b. taxing the output of industries that pollute c. creating legal environmental standards d. increasing public spending on cleanup and reduction of pollution

A. (relying on voluntary compliance.)

When economists make positive statements, they are a. speaking as scientists. b. speaking as policy advisers. c. making claims about how the world should be. d. revealing that they are very conservative in their views of how the world works.

A. (speaking as scientists)

An optimal tax on pollution would result in which of the following? a. Producers will choose not to produce any pollution. b. Producers will internalize the cost of the pollution. c. Producers will maximize production. d. The value to consumers at market equilibrium will exceed the social cost of production.

B (Producers will internalize the cost of the pollution.)

In the short run, an increase in the money supply is likely to lead to a. lower unemployment and lower inflation. b. lower unemployment and higher inflation. c. higher unemployment and lower inflation. d. higher unemployment and higher inflation.

B (lower unemployment and higher inflation)

When negative externalities are present in a market a. private costs will be greater than social costs. b. social costs will be greater than private costs. c. only government regulation will solve the problem. d. the market will not be able to reach any equilibrium.

B (social costs will be greater than private costs.)

For a good that is taxed, the area on the relevant supply-and-demand graph that represents government's tax revenue is a a. triangle. b. rectangle. c. trapezoid. d. None of the above is correct; government's tax revenue is the area between the supply and demand curves, above the horizontal axis, and below the effective price to buyers.

B.

If the price elasticity of supply is 1.2, and price increased by5%, quantity supplied would a. increase by 4.2%. b. increase by 6%. c. decrease by 4.2%. d. decrease by 6%.

B.

Assume that Nick and Faldo each has 2 hours available. If each person divides his time equally between the production of wheat and cloth, then total production is... (NOTE: Nick produces 8 bushels of wheat and 12 yards of cloth in 1 hour, and Faldo produces 6 bushels of wheat and 15 yards of cloth in 1 hour.) a. 8 bushels of wheat and 15 yards of cloth. b. 14 bushels of wheat and 27 yards of cloth. c. 16 bushels of wheat and 30 yards of cloth. d. 28 bushels of wheat and 34 yards of cloth.

B. (14 bushels of wheat and 27 yards of cloth.)

Which of these activities will most likely result in an external benefit? a. A college student buys a deck of cards to play solitaire in her dorm room. b. An elderly woman plants a flower garden on the vacant lot next to her house. c. An executive purchases a book to read on a business trip. d. A ten-year-old uses his allowance to buy new Nike shoes.

B. (An elderly woman plants a flower garden on the vacant lot next to her house.)

Which of the following is not an example of a market? a. A small town has only one seller of electricity. b. In the United States, a sick person cannot legally purchase a kidney. c. In Florida, there are many buyers and sellers of key lime pie. d. The availability of Internet shopping has expanded the clothing choices for buyers who do not live near large cities.

B. (In the United States, a sick person cannot legally purchase a kidney.)

Acme Home Builders, Inc., has built 24 houses so far this year at a total cost to the company of $4.80 million. If the company builds a 25th house, its total cost will increase to $5.05 million. Which of the following statements is correct? a. For the first 24 houses, the average cost per house was $205,000. b. The marginal cost of the 25th house, if it is built, will equal $250,000. c. If the company can sell the 25th house for at least $202,000, then it should build it. d. All of the above are correct.

B. (The marginal cost of the 25th house, if it is built, will equal $250,000.)

Which of the following would cause a movement along the supply curve for cupcakes? a. an improvement in technology for commercial mixers b. a decrease in the price of cupcakes c. an increase in the price of cake flour d. All of the above are correct.

B. (a decrease in the price of cupcakes)

Which of the following events would unambiguously cause a decrease in the equilibrium price of cotton shirts? a. an increase in the price of wool shirts and a decrease in the price of raw cotton b. a decrease in the price of wool shirts and a decrease in the price of raw cotton c. an increase in the price of wool shirts and an increase in the price of raw cotton d. a decrease in the price of wool shirts and an increase in the price of raw cotton

B. (a decrease in the price of wool shirts and a decrease in the price of raw cotton)

According to Arthur Laffer, the graph that represents the amount of tax revenue (measured on the vertical axis) as a function of the size of the tax (measured on the horizontal axis) looks like a. a U. b. an upside-down U. c. a horizontal straight line. d. an upward-sloping line or curve.

B. (an upside down U)

Elasticity of demand is closely related to the slope of the demand curve. The more responsive buyers are to a change in price, the a. steeper the demand curve will be. b. flatter the demand curve will be. c. further to the right the demand curve will sit. d. closer to the vertical axis the demand curve will sit.

B. (flatter the demand curve will be.)

The income elasticity of demand for caviar tends to be A. low because caviar is packaged in small containers B. high because buyers generally feel that they can do without it C. high because caviar is relatively expensive D. low because it is almost always in short supply

B. (high because buyers generally feel that they can do without it)

The Golden Rule can be used as a private solution for a. reducing crime. b. internalizing externalities. c. coping with overproduction. d. coping with scarcity.

B. (internalizing externalities.)

When the government prevents prices from adjusting naturally to supply and demand, a. it equates the amount buyers want to buy with the amount sellers want to sell. b. it adversely affects the allocation of resources. c. it improves equality and efficiency. d. it improves efficiency but reduces equality.

B. (it adversely affects the allocation of resources.)

Billie Jean has $120 to spend and wants to buy either a new amplifier for her guitar or a new mp3 player to listen to music while working out. Both the amplifier and the mp3 player cost $120, so she can only buy one. This illustrates the basic concept that a. trade can make everyone better off. b. people face trade-offs. c. rational people think at the margin. d. decisions made at the margin are not particularly important

B. (people face trade-offs.)

The smaller the price elasticity of demand, the a. more likely the product is a luxury. b. smaller the responsiveness of quantity demanded to a change in price. c. more substitutes the product has. d. greater the responsiveness of quantity demanded to a change in price.

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

The law of supply and demand asserts that a. demand curves and supply curves tend to shift to the right as time goes by. b. the price of a good will eventually rise in response to an excess demand for that good. c. when the supply curve for a good shifts, the demand curve for that good shifts in response. d. the equilibrium price of a good will be rising more often than it will be falling.

B. (the price of a good will eventually rise in response to an excess demand for that good.)

If the supply of a product increases, then we would expect equilibrium price a. to increase and equilibrium quantity to decrease. b. to decrease and equilibrium quantity to increase. c. and equilibrium quantity to both increase. d. and equilibrium quantity to both decrease.

B. (to decrease and equilibrium quantity to increase.)

A shortage exists in a market if a. there is an excess supply of the good. b. quantity supplied exceeds quantity demanded. c. the current price is below its equilibrium price. d. All of the above are correct.

C (the current price is below its equilibrium price.)

A very hot summer in Atlanta will cause...? A.) The demand curve for lemonade to shift to the left. B.) the demand for air conditioners to decrease. C.)the demand for jackets to decrease. D.) a movement downward and to the right along the demand curve for tank t

C (the demand for jackets to decrease)

There are very few, if any, good substitutes for automotive tires. Therefore, the demand for automotive tires would tend to be a. elastic. b. unit elastic. c. inelastic. d. highly responsive to changes in income as well as changes in prices

C.

Janine would be willing to pay $50 to see Les Misérables, but she buys a ticket for only $30. Janine values the performance at a. $20. b. $30. c. $50. d. $80.

C. ($50)

Which of the following statements is not valid when the market supply curve is vertical? a. Market quantity supplied does not change when the price changes. b. Supply is perfectly inelastic. c. An increase in market demand will increase the equilibrium quantity. d. An increase in market demand will increase the equilibrium price.

C. (An increase in market demand will increase the equilibrium quantity.)

Suppose there is a flood in St. Louis, Missouri, that destroys several beer bottling facilities. Which of the following would not be a direct result of this event? a. Sellers would not be able to produce and sell as much asbefore at each relevant price. b. The supply would decrease. c. Buyers would not be willing to buy as much as before at each relevant price. d. The equilibrium price would rise.

C. (Buyers would not be willing to buy as much as before at each relevant price.)

Mary and Martha both can make cookies and cakes of the same quality, though Mary can make more of both cookies and cakes per hour than Martha. With the bake-sale quickly approaching, they want to make as many cookies and cakes as possible. In which of the following situations will the most cookies and cakes be made? a. Mary makes as many cookies and cakes as she can, while Martha does nothing. b. Martha makes as many cookies and cakes as she can, while Mary does nothing. c. Mary and Martha both specialize in what they are better at making. d. There is not enough information

C. (Mary and Martha both specialize in what they are better at making.)

Which of the following is correct? a. Studies of the effects of the minimum wage typically find that a 10 percent increase in the minimum wage raises the average wage of teenagers by 10 percent. b. The drop in teenage employment caused by a 10 percent increase in the minimum wage is not significant. c. The minimum wage is more often binding for teenagers than for other members of the labor force. d. All firms consistently enforce minimum-wage laws.

C. (The minimum wage is more often binding for teenagers than for other members of the labor force.)

Suppose the United States had a short term shortage of farmers. Which mechanisms would adjust to remove the shortage? a. The government would provide tax incentives to encourage people to become farmers. b. The government would subsidize the production of food. c. The prices of food and the wages of farmers would adjust. d. There are no mechanisms to remove the shortage.

C. (The prices of food and the wages of farmers would adjust.)

A price floor is binding when it is set a. above the equilibrium price, causing a shortage. b. above the equilibrium price, causing a surplus. c. below the equilibrium price, causing a shortage. d. below the equilibrium price, causing a surplus.

C. (below the equilibrium price, causing a shortage.)

Prices usually reflect a. only the value of a good to society. b. only the cost to society of making a good. c. both the value of a good to society and the cost to society of making the good. d. neither the value of a good to society nor the cost to society of making the good

C. (both the value of a good to society and the cost to society of making the good.)

The demand for salt is inelastic, and the supply of salt is elastic. The demand for caviar is elastic, and the supply of caviar is inelastic. Suppose that a tax of $1 per pound is levied on the sellers of salt, and a tax of $1 per pound is levied on the buyers of caviar. We would expect that most of the burden of these taxes will fall on a. sellers of salt and the buyers of caviar. b. sellers of salt and the sellers of caviar. c. buyers of salt and the sellers of caviar. d. buyers of salt and the buyers of caviar.

C. (buyers of salt and the sellers of caviar.)

Price controls a. always produce a fair outcome. b. always produce an efficient outcome. c. can generate inequities of their own. d. All of the above are correct.

C. (can generate inequities of their own.)

The outer loop of the circular flow diagram represents the flow of dollars in the economy. Which of the following does not appear on the outer loop? a. wages b. income c. capital d. rent

C. (capital)

Patterns of trade among nations are primarily determined by a. cultural considerations. b. political considerations. c. comparative advantage. d. differences in the income elasticity of demand among nations.

C. (comparative advantage)

The goal of an economist who formulates new theories is to a. provide an interesting framework of analysis, whether or not the framework turns out to be of much use in understanding how the world works. b. provoke stimulating debate in scientific journals. c. contribute to an understanding of how the world works. d. demonstrate that economists, like other scientists, can formulate testable theories.

C. (contribute to an understanding of how the world works.)

Both tariffs and import quotas a. increase the quantity of imports and raise the domestic price of the good. b. increase the quantity of imports and lower the domestic price of the good. c. decrease the quantity of imports and raise the domestic price of the good. d. decrease the quantity of imports and lower the domestic price of the good.

C. (decrease the quantity of imports and raise the domestic price of the good.)

Welfare economics is the study of a. the well-being of less fortunate people. b. welfare programs in the United States. c. how the allocation of resources affects economic well-being. d. the effect of income redistribution on work effort.

C. (how the allocation of resources affects economic well-being)

If the government levies a $1,000 tax per boat on sellers of boats, then the price paid by buyers of boats would a. increase by more than $1,000. b. increase by exactly $1,000. c. increase by less than $1,000. d. decrease by an indeterminate amount

C. (increase by less than $1000)

Absolute advantage is found by comparing different producers' a. opportunity costs. b. payments to land, labor, and capital. c. input requirements per unit of output. d. locational and logistical circumstances.

C. (input requirements per unit of output.)

Normative conclusions a. come from positive analysis alone. b. are based on ignorance of positive analysis. c. involve value judgments. d. reflect the economist's role as scientist.

C. (involve value judgements)

When a surplus exists in a market, sellers... a. raise price, which increases quantity demanded and decreases quantity supplied, until the surplus is eliminated. b. raise price, which decreases quantity demanded and increases quantity supplied, until the surplus is eliminated. c. lower price, which increases quantity demanded and decreases quantity supplied, until the surplus is eliminated. d. lower price, which decreases quantity demanded and increases quantity supplied, until the surplus is eliminated.

C. (lower price, which increases quantity demanded and decreases quantity supplied, until the surplus is eliminated.)

Which of the following phrases best captures the notion of efficiency? a) absolute fairness b) equal distribution c) minimum waste d) equitable outcome

C. (minimum waste)

The price received by sellers in a market will increase if the government decreases a a. binding price floor in that market. b. binding price ceiling in that market. c. tax on the good sold in that market. d. None of the above is correct.

C. (tax on the good sold in that market.)

The government's benefit from a tax can be measured by a. consumer surplus. b. producer surplus. c. tax revenue. d. All of the above are correct.

C. (tax revenue)

For the purpose of protecting the environment, upon which the following approaches do we rely more and more as time goes by? a. adherence to the notion of the invisible hand b. command-and-control policies c. the development and enforcement of regulations d. the requirement that decision makers bear the full costs of their actions

C. (the development and enforcement of regulations)

One reason we need government, even in a market economy, is that a. there is insufficient market power in the absence of government. b. property rights are too strong in the absence of government. c. the invisible hand is not perfect. d. Both a and b are correct.

C. (the invisible hand is not perfect.)

Efficiency is illustrated by a. both the production possibilities frontier and the circular-flow diagram. b. neither the production possibilities frontier nor the circular-flow diagram. c. the production possibilities frontier only. d. the circular-flow diagram only.

C. (the production possibilities frontier only)

In the circular-flow diagram, firms produce a.goods and services using factors of production. b.output using inputs. c.factors of production using goods and services. d.Both (a) and (b) are correct

D. ((both (a) and (b) are correct))

Suppose a country abandons a notrade policy in favor of a free-trade policy. If, as a result, the domestic price of pistachios decreases to equal the world price of pistachios, then... a. that country becomes an exporter of pistachios. b. that country has a comparative advantage in producing pistachios. c. at the world price, the quantity of pistachios demanded in that country exceeds the quantity of pistachios supplied in that country. d. All of the above are correct.

D. (All of the Above)

Which of the following is not a characteristic of a perfectly competitive market? a. Sellers set the price of the product. b. There are many sellers. c. Buyers must accept the price the market determines. d. All of the above are characteristics of a perfectly competitive market.

D. (All of the above are characteristics of a perfectly competitive market.)

When a particular negative externality affects a very large number of people, it is likely that... a. government will not find it worthwhile to impose a corrective tax. b. private solutions to the problem will dominate any attempt by government to alleviate the problem. c. the solution to externalities suggested by the Coase theorum will work very well. d. the solution to externalities suggested by the Coase theorem will not work.

D. (The solution to externalities suggested by the coase theorem will not work.)

For a country that is considering the adoption of either a tariff or an import quota on a particular good, an important difference is that... a. an import quota has no effect on consumer surplus, while a tariff decreases consumer surplus. b. an import quota has no effect on producer surplus, while a tariff decreases producer surplus. c. a tariff raises total surplus, while an import quota does not. d. a tariff raises revenue for that country's government, while an import quota does not.

D. (a tariff raises revenue for that country's government, while an import quota does not.)

If a binding price ceiling is imposed on the baby formula market, then a. the quantity of baby formula demanded will increase. b. the quantity of baby formula supplied will decrease. c. a shortage of baby formula will develop. d. All of the above are correct.

D. (all of the above are correct)

Tradable pollution permits a. are widely viewed as a cost-effective way to reduce pollution. b. have helped reduce carbon emissions in Canada. c. have helped reduce sulfur dioxide emissions in the United States. d. All of the above are correct.

D. (all of the above are correct)

Suppose the equilibrium price of a physical examination by a doctor is $200, and the government imposes a price ceiling of $150 per physical. As a result of the price ceiling. a. the quantity of physicals demanded increases. b. there is shortage of physicals. c. the quantity of physicals supplied decreases. d. All of the above are correct

D. (all of the above)

Rick buys a 1966 Mustang for $3,000, planning to restore and sell the car. He goes on to spend $9,000 restoring the car. At this point he can sell the car for $10,000. As an alternative, he can spend an additional $3,000 replacing the engine. With a new engine the car would sell for $13,000. Rick should a. complete the repairs and sell the car for $13,000. b. sell the car now for $10,000. c. never try such an expensive project again. d. be indifferent between (i) selling the car now and (ii) replacing the engine and then selling it.

D. (be indifferent between (i) selling the car now and (ii) replacing the engine and then selling it.)

An early frost in the vineyards of Napa Valley would cause a(n) a. increase in the demand for wine, increasing price. b. increase in the supply of wine, decreasing price. c. decrease in the demand for wine, decreasing price. d. decrease in the supply of wine, increasing price.

D. (decrease in the supply of wine, increasing price.)

An increase in the price of a good will a. increase demand. b. decrease demand. c. increase quantity demanded. d. decrease quantity demanded.

D. (decrease quantity demanded.)

In general, elasticity is a measure of a. the extent to which advances in technology are adopted by producers. b. the extent to which a market is competitive. c. how firms' profits respond to changes in market prices. d. how much buyers and sellers respond to changes in market conditions

D. (how much buyers and sellers respond to changes in market conditions)

Government policies designed to equalize the distribution of economic well-being include... (i) the welfare system (ii) unemployment insurance (iii) progressive income tax a. (i) only b. (ii) only c. (i) and (ii) only d. (i), (ii), and (iii)

D. (i, ii, and iii)

For which of the following types of goods would the income elasticity of demand be positive and relatively large? a. all inferior goods b. all normal goods c. goods for which there are many complements d. luxuries

D. (luxuries)

When all market participants are price takers who have no influence over prices, the markets have a. only a few buyers and sellers. b. numerous sellers but only a few buyers. c. numerous buyers but only a few sellers. d. numerous buyers and sellers.

D. (numerous buyers and sellers)

You wear either shorts or sweatpants every day. You notice that sweatpants have gone on sale, so your demand for a. sweatpants will increase. b. sweatpants will decrease. c. shorts will increase. d. shorts will decrease

D. (shorts will decrease)

In a market economy, a. supply determines demand and demand, in turn, determines prices. b. demand determines supply and supply, in turn, determines prices. c. the allocation of scarce resources determines prices and prices, in turn, determine supply and demand. d. supply and demand determine prices and prices, in turn, allocate the economy's scarce resources

D. (supply and demand determine prices and prices, in turn, allocate the economy's scarce resources)

When a relevant variable that is not named on either axis changes, a. there will be a movement along the curve. b. the curve will rotate clockwise. c. the curve will be unaffected since only the variables on the axis affect the curve. d. the curve will shift.

D. (the curve will shift.)

Which of the following will cause a decrease in consumer surplus? a. an increase in the number of sellers of the good b. a decrease in the production cost of the good c. sellers expect the price of the good to be lower next month d. the imposition of a binding price floor in the market

D. (the imposition of a binding price floor in the market)

16. Which of the following events would cause a movement upward and to the right along the supply curve for mangos? a. The number of sellers of mangos increases. b. There is an advance in technology that reduces the cost of producing mangos. c. The price of fertilizer decreases, and fertilizer is an input in the production of mangos. d. The price of mangos rises.

D. (the price of mangos rises)

A movement along the supply curve might be caused by a change in a. production technology. b. input prices. c. expectations about future prices. d. the price of the good or service that is being supplied.

D.(the price of the good or service that is being supplied.)

"Ensuring that Social Security is financially sound for future generations is an important use of taxpayer dollars" is an example of kind of statement...

Normative Economic Statement

Which of the following expressions can be used to compute the price elasticity of demand? a. (Q2+-1)/(Q1-Q2) x (P1-P2)/(P2-P1) b. (Q2-Q1)/(Q1+Q2) x (P2+P1)/(P2-P1) c. (Q2+Q1)/(Q1-Q2) x (P1+P2)/(P2-P1) d. (Q2+Q1)/(Q1+Q2) x (P1+P2)/(P2+P1)

Price elasticity of demand= (Q2-Q1)/(Q1+Q2) X (P1+P2)/(P2-P1)

A likely example of complementary goods for most people would be...

canoes and paddles

A side effect or consequence of an industrial or commercial activity that affects other parties without this being reflected in the cost of the goods or services involved, such as the pollination of surrounding crops by bees kept for honey.

externalities

Danita rescues dogs from her local animal shelter. When Danitas income rises by 7 percent, her quantity demanded of dog biscuits increases by 12 percent. For Danita, the income elasticity of demand for dog biscuits is... a. negative, and dog biscuits are a normal good. b. negative, and dog biscuits are an inferior good. c. positive, and dog biscuits are an inferior good. d. positive, and dog biscuits are a normal good.

negative, and dog biscuits are a normal good

A likely example of substitute goods for most people would be...

pens and pencils

What is Elasticity?

the degree to which individuals, consumers or producers change their demand or the amount supplied in response to price or income changes