Question

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 rises by 100 percent, quantity demanded falls by 1 percent.
	c.	as income rises by 50 percent, quantity demanded falls by 25 percent.
	d.	as income falls by 20 percent, quantity demanded increases by 10 percent.

When the price of good A is $5, the quantity demanded of good B is 30 units, and when the price of good A increases to $10, the quantity demanded of good B decreases to 15 units. Based on this information, we can conclude that:

	a.	Both goods are inferior (lower demand) goods.
	b.	The cross price elasticity of demand of good B with respect to the price of good A is 0.5
	c.	Goods A and B are substitutes in consumption.
	d.	Goods A and B are complements in consumption because the cross price elasticity coefficient is -0.50.

Answer 1

1. the answer is b as own price elasticity because a measure of rate of percentage qty demanded wrt to it price while other things holding constant is known as price elasticity.

2. ans a that means for 10 percentage rise/ increasein income will lead to 1 percentage rise / increase in the qty demanded.

3.ans is d because because good A and B are complementary goods as when price of good A rise qty demanded of good B falls that is inverse relationship between two goods price and qty demanded. if we calculate its elasticity =rate of change in qty demanded/qty*rate of change in price/price= 15/30*5/5=0.5 (inverse relationship so that we will become -0.5).