W05 Quiz Elasticity

The definition of a normal good suggests that the income elasticity of demand for the good is negative. price elasticity of demand for the good is negative. income elasticity of demand for the good is greater than 0. cross-price elasticity of demand for the good is positive.

income elasticity of demand for the good is greater than 0.

If the demand for product X is inelastic, a 20 percent decrease in the price of X will decrease the quantity of X demanded by more than 20 percent. decrease the quantity of X demanded by less than 20 percent. increase the quantity of X demanded by more than 20 percent. increase the quantity of X demanded by less than 20 percent.

increase the quantity of X demanded by less than 20 percent.

If the demand for product X is elastic, a 4 percent decrease in the price of X will decrease the quantity of X demanded by more than 4 percent. decrease the quantity of X demanded by less than 4 percent. increase the quantity of X demanded by more than 4 percent. increase the quantity of X demanded by less than 4 percent.

increase the quantity of X demanded by more than 4 percent.

The income elasticity of demand for jewelry is 2. Other things equal, a 10% increase in consumer income will ___________ the quantity of jewelry demanded by ________ decrease; 20%. increase; 5%. decrease; 5%. increase; 20%.

increase; 20%.

If the absolute value of the price elasticity of demand for a good is .75, the demand for that good is described as normal. elastic. inferior. inelastic.

inelastic.

A negative income elasticity of demand indicates that the product is an inferior good. is a normal good. is a complementary good. is a substitute good.

is an inferior good.

Cross-price elasticity of demand is negative for complementary goods. negative for substitute goods. unitary for secondary goods. positive for general goods.

negative for complementary goods.

Assume that a 3% increase in income across the economy produces a 1% decrease in the quantity of fast food demanded. The income elasticity of demand for fast food is ____________, and therefore fast food is _______________ negative; an inferior good. negative; a normal good. positive; an inferior good. positive; a normal good.

negative; an inferior good.

Suppose that a 20% increase in income generates a 15% increase in the quantity of X demanded. The income elasticity of demand for good X is negative and therefore X is an inferior good. positive and therefore X is a normal good. negative and therefore X is an complementary good. positive and therefore X is a substitute good.

positive and therefore X is a normal good.

If a 10% increase in the price of one good, A, results in an increase of 5% in the quantity demanded of another good, B, then it can be concluded that A and B are complementary goods. substitute goods. independent goods. secondary goods.

substitute goods.

Suppose the price of local cable TV service increased from $18.50 to $21.20 and as a result the number of cable subscribers decreased from 400,000 to 320,000. Along this portion of the demand curve, using the midpoint method, price elasticity of demand is approximately −0.61. −1.63. −2.3. −0.8.

−1.63.