3.2 quiz

Assume that a 4 percent increase in income across the economy produces an 8 percent increase in the quantity demanded of good X. The coefficient of income elasticity of demand is: a) positive and therefore X is a normal good. b) negative and therefore X is a normal good. c) negative and therefore X is an inferior good. d) positive and therefore X is an inferior good.

a

Suppose that a 20 percent increase in the price of normal good Y causes a 10 percent decline in the quantity demanded of normal good X. The coefficient of cross elasticity of demand is: a) negative and therefore these goods are complements. b) positive and therefore these goods are substitutes. c) positive and therefore these goods are complements. d) negative and therefore these goods are substitutes.

a

The cross elasticity of demand between Quaker State motor oil and Texaco motor oil is likely to be: a) A positive number b) A small negative number c) A large negative number d) Zero

a

Compared to coffee, we would expect the cross elasticity of demand for: a) tea to be negative, but positive for cream. b) tea to be positive, but negative for cream. c) both tea and cream to be negative. d) both tea and cream to be positive.

b

The larger the positive cross elasticity coefficient of demand between products X and Y, the: a) stronger their complementariness. b) greater their substitutability. c) the less sensitive purchases of each are to increases in income. d) smaller the price elasticity of demand for both products.

b

The supply of product X is perfectly inelastic if the price of X rises by: a) 7 percent and quantity supplied rises by 5 percent. b) 8 percent and quantity supplied rises by 8 percent. c) 10 percent and quantity supplied stays the same. d) 5 percent and quantity supplied rises by 7 percent.

c

Suppose the supply of product X is perfectly inelastic. If there is an increase in the demand for this product, equilibrium price: a) and quantity will both decrease. b) will increase but equilibrium quantity will decline. c) will decrease but equilibrium quantity will increase. d) will increase but equilibrium quantity will be unchanged.

d

The main determinant of elasticity of supply is the: a) number of uses for the product. b) number of close substitutes for the product available to consumers. c) urgency of consumer wants for the product. d) amount of time the producer has to adjust inputs in response to a price change.

d

The supply of known Monet paintings is: a) perfectly elastic. b) relatively elastic. c) relatively inelastic. d) perfectly inelastic.

d

Which of the following goods will least likely suffer a decline in demand during a recession? a) Dinner at a nice restaurant b) Plasma screen and LCD TVs c) iPods d) Toothpaste

d