Question

**Q8. Cross-price elasticity of demand is calculated as
the**

A) percentage change in quantity demanded divided by percentage change in price of a good.

B) percentage change in quantity demanded of one good divided by percentage change in price of a different good.

C) percentage change in quantity sold divided by percentage change in buyers' incomes.

**Q.9. If the cross-price elasticity of demand for
computers and software is negative, this means the two goods
are**

A) substitutes. B) complements. C) inferior. D) normal. D) percentage change in quantity supplied divided by percentage change in price of a good.

**Q.10. Suppose Tinsel Town Videos lowers the price of its
movie club membership by 10 percent and as a result, CineArts
Videos experienced a 16 percent decline in its movie club
membership. What is the value of the cross-price elasticity between
the two movie club memberships?**

A) -1.6 B) -0.625 C) 0.625 D) 1.6

Q.11) Suppose you are in charge of pricing at Apple Computer and you wish to increase revenues from your Macintosh line. Apple's chief economist informs you that the price elasticity of demand for Macintoshes is estimated to be E = - 1.17. Based on this information, you would:

a) increase price. b) decrease price. c) not change price. d) not enough information to make a rational decision.

Q**.12 Marginal utility:**

A. is the change in total utility caused by the consumption of an addition unit of a good.

B. is equal to total utility divided by total consumption.

C. always decreases as consumption increases.

D. is never negative.

E. all of the above.

**13. According to the law of diminishing marginal
utility:**

A. marginal utility always falls with the extra consumption of a good.

B. a consumer inevitably reaches a point where the additional satisfaction from consuming each additional unit of a good rises.

C. a consumer inevitably reaches a point where he or she decreasingly values additional units of a good.

D. utility is easily measured by dollar values.

E. none of the above.

**Q. 14. If total utility is increasing, marginal
utility:**

A. must be increasing.

B. must be decreasing.

C. may either be increasing or decreasing, although it must be greater than zero.

D. must be increasing at an increasing rate.

E. none of the above.

Answer #1

Cross price elasticity(CE) = %change in quantity demanded of one good/%change in the pirce of other good.

If CE is negative then goods are complement goods.

If CE is positive the goods will be substitute goods.

8. The answer is B

9) The answer is B

10) CE = (-16%)/(-10%) = 1.6

11) Answer is B. ( If demand is elastic then a fall in price leads to a higher quantity demanded and therefore hgher total revenue(.

12) Answer is A

13)C

14) C

If total utility is increasing ,marginal utility will surely be osive however i may decrease or increase or stay constant.

Cross-price elasticity of demand is calculated as
the
total percentage change in quantity demanded divided by the total
percentage change in price.
percentage change in the price of good 1 divided by the percentage
change in the price of good 2.
percentage change in quantity demanded divided by the percentage
change in income.
percentage change in quantity demanded of good 1 divided by the
percentage change in the price of good 2.

The cross-price elasticity of demand measures the
absolute change in the quantity demanded of one good divided by
the absolute change in the price of another good.
percentage change in the price of one good divided by the
percentage change in the quantity demanded of another good.
percentage change in the quantity demanded of one good in one
location divided by the price of the same good in another
location.
percentage change in the quantity demanded of one good divided...

Cross Price Elasticity simply measures the percentage
change in quantity demanded of one good divided by the percentage
change in price of another good. For example, the enrollment of
college students at California state-funded community colleges
would probably fall slightly if the popular
California UC and CSU universities (e.g. UC Berkeley) lowered their
prices by 50 percent.
True or False?

The price elasticity of demand measures:
Select one:
a. the percentage change in quantity demanded of a good in
response to a one percentage change in
income
b. none of the above
c. the change in the number of units demanded of a good in
response to a one percentage change in
its price
d. the percentage change in quantity demanded of a good in
response to a one dollar change in its
price

A measure of the rate of percentage change of quantity demanded
with respect to price, holding all other determinants of demand
constant is
a.
Income elasticity of demand
b.
Own price elasticity of demand
c.
Price elasticity of market equilibrium
d.
Cross price elasticity of demand
The value of the income elasticity of demand coefficient for
Good X is given as 0.1. This means that
a.
as income increases by 10 percent, quantity demanded rises by 1
percent.
b.
as income...

If the price of good C decreases by 2% and the quantity
demanded of good D decreases by 8%, what is the cross price
elasticity of demand. Are the two goods substitutes or
complements? Why?
If the price of good A decreases by 1.3% and the price
elasticity of demand is 1.5, find the percentage change in quantity
demanded and the percentage change in revenue. If you
want to increase revenue should you increase or decrease the price
in this case?
Part B...

QUESTION 21
If the percentage change in quantity demanded is greater than
the percentage change in price for good A, then the demand for good
A is
a.
inelastic.
b.
unit elastic.
c.
elastic.
d.
perfectly inelastic.
QUESTION 22
If the percentage change in quantity demanded is less than the
percentage change in price for good B, then the demand for good B
is
a.
inelastic.
b.
unit elastic.
c.
elastic.
d.
perfectly elastic.
QUESTION 23
If the percentage change...

The cross-price elasticity of demand between goods X and Y
measures the responsiveness of the quantity of X demanded to
changes in the price of Y.
is the percentage change in the price of Y divided by the
percentage change in the quantity of X demanded.
is greater than zero if X and Y are substitutes.
both a and c
all of the above

The following table lists the cross elasticity of demand for
several goods, where the percentage quantity change is measured for
the first good of the pair, and the percentage price change is
measured for the second good.
Good Cross elasticity of demand
Air-conditioning units and kilowatts of electricity -0.34
Coke and Pepsi 0.63
High-fuel-consuming SUVs and gasoline -0.28
McDonald’s burgers and Harvey burgers 0.82
Butter and Margarine 1.54
1.Explain the sign of each of the cross elasticities. What does
it...

a) Using the percentage change method, calculate the cross
elasticity if the price of margarine falls from $2 to $1.60 and the
quantity of butter demanded falls from 500 to 450. Are these two
products substitutes or complements? b) If the income elasticity of
a product is 2, how much would income need to change for quantity
to increase by 20%? Is this a normal or inferior good?

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