The income elasticity of demand

Assignment Help Business Economics
Reference no: EM131385536

1. Suppose that the income elasticity of demand for peanut butter is 0.75. Which of the following is true?

a. Peanut butter is a normal good, because income elasticity is less than 1. b. Peanut butter is a normal good, because income elasticity is positive. c. Peanut butter is an inferior good, because income elasticity is positive. d. Peanut butter is an inferior good, because income elasticity is less than 1.

2. If the prices of computer tablets rise, we would expect the number of tablet covers purchased to:

a. decrease. b. increase. c. be equal to one. d. be equal to ten.

3. A measure of the responsiveness of the demand for one good to the percentage change in the price of another good is:

a. price elasticity of supply. b. cross price elasticity of demand. c. income elasticity. d. price elasticity of demand.

4. The percentage change in the demand for one good divided by the percentage change in the price of a related good is the Select one: a. price elasticity of supply. b. income elasticity. c. price elasticity of demand. d. cross price elasticity of demand.

5. If an individual's income rises 40 percent and his clothing purchases increase 50 percent in response, the income elasticity for clothing by the individual is

a. -1.25.

b. 1.25.

c. 0.8.

d. -0.8.

6. When Mary earned $3,200 per month, she bought 2 concert tickets each month. Now her monthly income is $5,600, and the number of concert tickets she purchases has risen to 3 per month. Mary's income elasticity of demand for concert tickets equals ________ and the tickets are a(n) ________ good for Mary.

a. +0.73; normal

b. -0.21; inferior

c. +0.21; complementary

d. -1.36; normal

7. The income elasticity of demand

a. must lie between -1 and +1. b. is positive only. c. can be positive, negative, or zero. d. is negative only.

8. If one's demand for peanut butter decreases as income rises, the income elasticity of demand for the product is

a. inelastic.

b. elastic.

c. unit elastic.

d. negative.

Reference no: EM131385536

Questions Cloud

When the possibility of collusion exists in a duopoly : When the possibility of collusion exists in a duopoly, but both firms cheat after colluding, how will their actual profits differ from their expected profits?
Find the minimum level of output needed to deter entry : Stackelberg and Limit Pricing. Consider the Limit pricing and Stackelberg models done in class in which the incumbent chooses capacity first and entrant then chooses whether to enter or not. Find the minimum level of output needed to deter entry (qID..
The economist definition of investment : The difference between the price the firm sells a good for and the price it paid other firms for intermediate goods is called. The annual charge that estimates the amount of capital equipment used up in each year’s production is called. Which of the ..
The quantity of goods and services produced in the economy : Which measure of GDP represents changes in the quantity of goods and services produced in the economy, holding prices constant? Which of the following do we subtract from GNP to obtain NNP? Over time prices may change relative to each other, In order..
The income elasticity of demand : Suppose that the income elasticity of demand for peanut butter is 0.75. Which of the following is true? If the prices of computer tablets rise, we would expect the number of tablet covers purchased to: The income elasticity of demand
A liquidity trap arises when : If there is too much deflation: A liquidity trap arises when:
Suppose that firms choose prices simultaneously : Differentiated Bertrand. Consider a Differentiated Bertrand model in which demand is given by q1 = 100 – p1 + p2 and q2 = 100 – p2 + p1 for firm 1 and firm 2 respectively and where both firms faced zero fixed costs and constant marginal cost = c. Sup..
Is profit equal to producer surplus here : Demand is defined by P=250-2Qd. Suppose that marginal cost is MC=Q where Q is the quantity produced by the monopoly. Find the monopoly quantity. Find the monopoly price. Is profit equal to producer surplus here?
Goods is likely to have the highest income elasticity : When Fred's income was $100 per week, 10 units of good X were demanded. Now his income is $150 per week and 12 units of good X are demanded. Using the percentage change formula, the income elasticity of demand for good X equals ________. Which of the..

Reviews

Write a Review

 

Business Economics Questions & Answers

  Assume an oligopoly market with two firms

Assume an oligopoly market with two firms. The inverse demand function and cost functions are as follows: P=150-2(Q1+Q2) and C1=20Q1 and C2=28Q2. Calculate: a. Cournot dupoly equilibrium output, price and profit, b. Stackelberg equilibrium output, pr..

  Expect to have more elastic demand and why

In each of the following situations, which good would you expect to have more elastic demand and why? Required textbooks or mystery novels. Beethoven recordings or classical recordings in general.

  Replace its grape pressing machine

The Whine not winery (WnW) must replace its grape pressing machine. 2 companies have submitted bids, KS and SM. The annual operating costs of both increase at 12% per year and the WnW uses a MARR of 9%. KS's first cost 350k, initial annual operating ..

  Q1 dominant price leadership exists when the dominant firm

q1. dominant price leadership exists when the dominant firm establishes the price at the quantity where its mr mc and

  Compute total revenue at the three meal prices

Suppose you are the manager of a restaurant that serves an average of 400 meals per day at an average price per meal of $20. On the basis of a survey, you have determined that reducing the price of an average meal to $18 would increase the quantity d..

  What is unemployment rate-labor force participation rate

The number of people employed in a city were 128,000. The adult population was 201, 000 and the labor force participation rate was 67%. Based on the figures listed above, what is (1) the unemployment rate, (2)labor force participation rate, (3) numbe..

  Social-economic-technological-competitive and regulatory

Conduct an environmental scan for Zappos and identify key trends. For each of the five environmental forces (social, economic, technological, competitive, and regulatory), identify trends likely to influence your company's marketing efforts and produ..

  Federal reserve bank adopts expansionary monetary policy

Suppose the Federal Reserve Bank adopts expansionary monetary policy. Using the graph of supply and demand for the market of short term Treasury securities, show graphically and breifly explain what happens to the price of short term treasury securit..

  Role of government in the economy

With the ongoing debate about Healthcare and the current efforts to pull the economy out of the doldrums, the question comes up what is the role of government in the free market?

  Transition in the formerly planned socialist economic system

A major problem for the implementation of privatization during the early years of transition in the formerly planned socialist economic systems has been

  Does this game have pure-strategy nash equilibrium

Player 1 ("hider") and Player 2 ("seeker") play the following game. There are four boxes with lids, arranged in a straight line. For convenience, the boxes are labeled A, B, C, D. The admin of the game gives player 1 a $100 bill, and player 1 must hi..

  What is the equation for the chunzheng''s long-run

Given your results from above, what is the equation for the Chunzheng's long-run total cost curve as a function of quantity Q. How much does it cost to produce 27,000 units?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd