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How can income elasticity be used to determine whether a good is normal or inferior?

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The sign of the income elastic...

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Suppose the demand curve is perfectly inelastic and the government imposes a tax of $2 per unit.What portion of the tax will be paid by the producer?

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The more inelastic the demand curve of a...

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Suppose that the price of Product A increased from $9 to $11 and the quantity demanded of Product B increased from 192 to 208.What is the value of the cross elasticity?


A) + 0.2.
B) + 0.4.
C) + 1.0.
D) + 2.5.
E) + 5.0.

F) A) and E)
G) C) and D)

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Which of the following statements is true about the price elasticity of demand?


A) It is higher in the short run than in the long run because people's habits change slowly.
B) It is higher in the long run than the short run because people have more time to find substitute products.
C) It is the same in the short run and the long run.
D) It is higher in the short run because markets adjust slowly to changes.

E) A) and B)
F) C) and D)

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Table 4.2 shows Alex's demand schedule for chocolate bars. Table 4.2 Table 4.2 shows Alex's demand schedule for chocolate bars. Table 4.2

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a)Calculate the price elasticity of dema...

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-Graphically,what is the effect of imposing an excise tax on a product? A) It will shift both the supply and the demand curve for the product to the left. B) It will shift the supply curve for the product to the left. C) It will shift the supply curve for the product to the right. D) It will shift both the supply and the demand curve for the product to the right. E) It will shift the supply curve for the product to the left and the demand curve to the right. -Graphically,what is the effect of imposing an excise tax on a product?


A) It will shift both the supply and the demand curve for the product to the left.
B) It will shift the supply curve for the product to the left.
C) It will shift the supply curve for the product to the right.
D) It will shift both the supply and the demand curve for the product to the right.
E) It will shift the supply curve for the product to the left and the demand curve to the right.

F) A) and E)
G) B) and C)

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What is the formula used to calculate the price elasticity of demand?


A) Change in price divided by change in quantity demanded.
B) Change in quantity demanded divided by change in price.
C) Percentage change in price divided by percentage change in quantity demanded.
D) Percentage change in quantity demanded divided by percentage change in price

E) C) and D)
F) B) and C)

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Suppose that the price of a product increased from $1.90 to $2.10,and the quantity demanded decreased from 24 to 16.What is the value of the price elasticity of demand?


A) 0.5.
B) 0.58.
C) 1.0.
D) 1.73.
E) 4.0.

F) A) and E)
G) B) and D)

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What term is used to describe quantities demanded that do not change much in response to a change in price?


A) Inelastic demand.
B) Elastic demand.
C) Unitary elasticity.
D) Price elasticity of demand.
E) The elasticity coefficient.

F) A) and B)
G) None of the above

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The graph below illustrates three demand curves. The graph below illustrates three demand curves. -Refer to the graph above to answer this question.Which of the following statements is correct? A) Demand curve D<sub>3</sub> is the most inelastic demand. B) Equilibrium price must be $50. C) If price is $30 and demand is D<sub>3</sub> then the quantity demanded is 720 units per day. D) Demand curve D<sub>1</sub> is more inelastic than D<sub>3</sub>. E) Demand curve D<sub>1</sub> is perfectly elastic. -Refer to the graph above to answer this question.Which of the following statements is correct?


A) Demand curve D3 is the most inelastic demand.
B) Equilibrium price must be $50.
C) If price is $30 and demand is D3 then the quantity demanded is 720 units per day.
D) Demand curve D1 is more inelastic than D3.
E) Demand curve D1 is perfectly elastic.

F) C) and D)
G) C) and E)

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-Refer to the graphs above to answer this question.Suppose that the price of orange juice increases from P<sub>1</sub> to P<sub>2</sub> and the demand curve for apple juice shifts to the right from D<sub>1</sub> to D<sub>2</sub>.What is the effect to total revenue from the sale of apple juice? A) Total revenue will not change since the cross-elasticity coefficient is not known. B) Total revenue will rise. C) Total revenue may rise or fall depending on the size of the price increase. D) Total revenue will fall. E) Total revenue will not change since there is no change in the price of apple juice. -Refer to the graphs above to answer this question.Suppose that the price of orange juice increases from P1 to P2 and the demand curve for apple juice shifts to the right from D1 to D2.What is the effect to total revenue from the sale of apple juice?


A) Total revenue will not change since the cross-elasticity coefficient is not known.
B) Total revenue will rise.
C) Total revenue may rise or fall depending on the size of the price increase.
D) Total revenue will fall.
E) Total revenue will not change since there is no change in the price of apple juice.

F) C) and D)
G) B) and D)

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Why is the price elasticity of demand for toothpicks so different from that of houses?

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The elasticity of demand for toothpicks ...

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What is the effect on total revenue if demand is inelastic and price rises?


A) Total revenue will fall.
B) Total revenue will rise.
C) Total revenue may rise or fall depending on the size of the price increase.
D) Elasticity is not relevant,since total revenue always rises if price increases.

E) None of the above
F) All of the above

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Which of the two following pairs of product categories are income elastic?


A) Food and housing.
B) Public transport and household operation.
C) Tobacco and alcohol.
D) Education and textbooks.

E) None of the above
F) B) and D)

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Below are some data on price,income and demand for five different time periods. Below are some data on price,income and demand for five different time periods. -Refer to the information above to answer this question.Between years 4 and 5,both the price and the quantity demanded of X increased.What is the best possible explanation of this? A) Graphically,the demand curve for X must be upward sloping. B) Product Y is a complement of product X. C) Product X is a substitute for product Y. D) Graphically,the demand curve for product X must have shifted leftwards. E) None of the choices are correct. -Refer to the information above to answer this question.Between years 4 and 5,both the price and the quantity demanded of X increased.What is the best possible explanation of this?


A) Graphically,the demand curve for X must be upward sloping.
B) Product Y is a complement of product X.
C) Product X is a substitute for product Y.
D) Graphically,the demand curve for product X must have shifted leftwards.
E) None of the choices are correct.

F) A) and C)
G) All of the above

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What is an excise tax? Demonstrate the effect of an excise tax paid by suppliers on equilibrium quantity and price.

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An excise tax is a tax levied on a speci...

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The graph below illustrates three demand curves. The graph below illustrates three demand curves. -Refer to the graph above to answer this question.In the $50 to $60 price range,which of the following statements is correct? A) D<sub>1</sub> and D<sub>2</sub> are both elastic. B) D<sub>1</sub> and D<sub>2</sub> are both perfectly inelastic. C) D<sub>2</sub> is the most inelastic. D) D<sub>3</sub> is the most inelastic. E) D<sub>1</sub> is the most inelastic. -Refer to the graph above to answer this question.In the $50 to $60 price range,which of the following statements is correct?


A) D1 and D2 are both elastic.
B) D1 and D2 are both perfectly inelastic.
C) D2 is the most inelastic.
D) D3 is the most inelastic.
E) D1 is the most inelastic.

F) A) and B)
G) A) and C)

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Suppose that household income in Charlottetown increases from $44,000 to $45,000 and,assuming no change in price the quantity of Baker Baked Beans rises from 90 to 94 cases per week. a)What is income elasticity of demand for the beans? b)What does this suggest about this product?

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a)+1.97
b)...

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What is a normal good?


A) It is a good whose income elasticity of demand is less than zero.
B) It is a good whose demand will rise as income rises.
C) It is a good that has many substitutes.
D) It is a necessity.

E) C) and D)
F) All of the above

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How can the cross-price elasticity be used to determine whether two goods are complements or substitutes?

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The cross-price elasticity is the percen...

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