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.