Click on the links above to watch
these Key Problems:
INCOME ELASTICITY OF DEMAND -
MULTIPLE CHOICE
1. Income elasticity of demand
measures how sensitive purchases of a specific product are
to changes in:
A. the price of some
other product.
B. the price of that same product.
C. income.
D. the general price level.
2. The formula for income elasticity
of demand is percentage change in:
A. quantity demanded of X
/ percentage change in price of X.
B. quantity demanded of X / percentage change in
income.
C. quantity demanded of X / percentage change in price of
Y.
D. price of X / percentage change in quantity demanded of
Y.
3. Which type of goods are most
affected by recessions (by a decrease in income)?
A. Goods for which the
income elasticity coefficient is relatively low.
B. Goods for which the income elasticity coefficient is
relatively high.
C. Goods for which the cross elasticity coefficient is
positive.
D. Goods for which the cross elasticity coefficient is
negative.
4. Suppose the income elasticity of
demand for boats is +2.0. This means that:
A. a 10 percent increase
in income will increase the purchase of boats by 20
percent.
B. a 10 percent increase in income will decrease the
purchase of boats by 20 percent.
C. a 10 percent increase in income will increase the
purchase of boats by 2 percent.
D. a 10 percent increase in income will increase the
purchase of boats by 2 percent.
5. Suppose the income elasticity of
demand for ramen noodles is -2.0. This means that:
A. a 10 percent increase
in income will increase the purchase of ramen noodles by
20 percent.
B. a 10 percent increase in income will decrease the
purchase of ramen noodles by 20 percent.
C. a 10 percent increase in income will increase the
purchase of ramen noodles by 2 percent.
D. a 10 percent increase in income will increase the
purchase of ramen noodles by 2 percent.
6. Suppose the income elasticity of
demand for electricity is +0.5. This means that:
A. a 10 percent increase
in income will increase the purchase of electricity by 50
percent.
B. a 10 percent increase in income will decrease the
purchase of electricity by 50 percent.
C. a 10 percent increase in income will increase the
purchase of electricity by 5 percent.
D. a 10 percent increase in income will increase the
purchase of electricity by 5 percent.
7. income elasticity can be used to
tell if a product is a normal good or inferior good. Which
income elasticity coefficient below indicates that the
product is an inferior good?
A. Edy = +2.0
B. Edy = -2.0
C. Edy = +0.5.
D. Edy = 1.
8. income elasticity can be used to
tell if a product is a luxury or a necessity. Which income
elasticity coefficient below indicates that the product is a
necessity?
A. Edy = +2.0
B. Edy = -2.0
C. Edy = +0.5.
D. Edy = -0.5.
CROSS ELASTICITY OF DEMAND -
MULTIPLE CHOICE
1. Cross elasticity of demand
measures how sensitive purchases of a specific product are
to changes in:
A. the price of some
other product.
B. the price of that same product.
C. income.
D. the general price level.
2. The formula for cross elasticity
of demand is percentage change in:
A. quantity of X /
percentage change in price of X.
B. quantity of X / percentage change in income.
C. quantity of X / percentage change in price of Y.
D. price of X / percentage change in quantity demanded of
Y.
3. We would expect the cross
elasticity of demand between Pepsi and Coke to be:
A. negative and therefore
these goods are substitutes.
B. negative and therefore these goods are
complements.
C. positive and therefore these goods are
substitutes.
D. positive and therefore these goods are
complements.
4. Suppose that a 20 percent increase
in the price of good Y causes a 10 percent decline in the
quantity demanded of good X. The coefficient of cross
elasticity of demand is:
A. Negative (complements)
and cross elastic.
B. Negative (complements) and cross inelastic.
C. positive (substitutes) and cross elastic.
D. positive (substitutes) and cross
inelastic.
5. Suppose the cross elasticity of
demand for Mobil gasoline and BP gasoline is +2.0. This
means that:
A. a 10 percent increase
in price of Mobil gasoline will increase the purchase of
BP gasoline by 20 percent.
B a 10 percent increase in price of Mobil gasoline will
decrease the purchase of BP gasoline by 20 percent.
C. a 10 percent increase in price of Mobil gasoline will
increase the purchase of BP gasoline by 2 percent.
D. a 10 percent increase in price of Mobil gasoline will
decrease the purchase of BP gasoline by 2
percent.
6. Suppose the cross elasticity of
demand for movie tickets and movie popcorn is -2.0. This
means that:
A. a 10 percent increase
in price of movie tickets will increase the purchase of
movie popcorn by 20 percent.
B. a 10 percent increase in price of movie tickets will
decrease the purchase of movie popcorn by 20 percent.
C. a 10 percent increase in price of movie tickets will
increase the purchase of movie popcorn by 2 percent.
D. a 10 percent increase in price of movie tickets will
decrease the purchase of movie popcorn by 2
percent.
7. Suppose the cross elasticity of
demand for butter and margarine is +0.5. This means that:
A. a 10 percent increase
in the price of butter will increase the quantity of
margarine by 50 percent.
B. a 10 percent increase in the price of butter will
decrease the quantity of margarine by 50 percent.
C. a 10 percent increase in the price of butter will
increase the quantity of margarine by 5 percent.
D. a 10 percent increase in the price of butter will
decrease the quantity of margarine by 5
percent.
8. Cross elasticity can be used to
tell if two products are substitutes or complements. Which
cross elasticity coefficient below indicates that the
products are complements?
A. Eab = +2.0
B. Eab = -2.0
C. Eab = +0.5.
D. Eab = 1.
|
