Question

40) The cross elasticity of demand for butter and margarine is likely to be A) positive because they are substitutes.

B) positive because they are complements.

C) negative because they are substitutes.

D) negative because they are complements.

E) positive because they are normal goods.

41) If an increase in the price of green ketchup increases the demand for red ketchup, then

A) red and green ketchup are substitutes.

B) red and green ketchup are normal goods.

C) the cross elasticity of demand for these two kinds of ketchup is positive. D) Both answers A and C are correct.

E) Both answers A and B are correct.

42) If the cross elasticity of demand between Coke and Pepsi is 2.02, then Coke and Pepsi are

A) complements.

B) substitutes.

C) normal goods.

D) inferior goods.

E) Both answers B and C are correct.

43) The cross elasticity between computers and software is A) negative because they are substitutes.

B) positive because they are substitutes.

C) negative because they are complements.

D) positive because they are complements.

E) positive because they are normal goods.

44) When two goods are related such that an increase in the price of one good decreases the quantity demanded of the

other good, these goods are definitely A) normal goods.

B) luxury goods.

C) complements.

D) substitutes.

E) inferior goods.

45) The cross elasticity of demand for film cameras and film is likely to be

A) positive because they are substitutes.

B) positive because they are complements.

C) negative because they are substitutes.

D) negative because they are complements.

E) negative because with the advent of digital cameras, film and film cameras are inferior goods

46) The income elasticity of demand is a measure of

A) how demand for a product changes when the price of a substitute or complement product changes.

B) how responsive consumers are to changes in the price of a product.

C) how responsive suppliers are to changes in the price of a product.

D) the extent to which the demand for a good changes when income changes.

E) the extent to which the supply of a good changes when the demand changes as a result of a change in income.

47) The income elasticity of demand is

A) positive for a normal good.

B) zero for an inferior good.

C) less than one for an income elastic normal good. D) Only answers A and B are correct.

E) Answers A, B, and C are correct.

48) The income elasticity of demand for skiing trips to Vermont is greater than one. Thus a trip to Vermont for skiing is ____

good.

A) a normal

B) an inferior

C) a unit elastic

D) a price elastic E) a price inelastic

49) If a 5 percent increase in income brings about a 10 percent decrease in the demand for a good, then the

A) good is a normal good.

B) good is an inferior good.

C) income elasticity of demand is 0.5. D) income elasticity of demand is 2.0. E) income elasticity of demand is 5.0.

50) If a 5 percent decrease in income leads to a 15 percent decrease in the demand for a good, the income elasticity of demand equals ____

A) -1/3 and the good is an inferior good.

B) 1/3 and demand for the good is income elastic.

C) 3 and the good is a normal good.

D) -3 and the demand for the good is income inelastic. E) 3 and the good is an inferior good

Answer 1