Complements and Substitutes in Economics Quiz
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Questions and Answers

What does the cross-price elasticity measure?

  • Responsiveness of quantity demanded to a change in the price of a related good (correct)
  • Responsiveness of quantity demanded to a change in income
  • Responsiveness of quantity supplied to a change in the price of a related good
  • Responsiveness of quantity demanded to a change in price of the same good

    • Which type of goods are complements?

  • Goods that are unrelated
  • Goods with no impact on each other's demand
  • Goods that are produced together
  • Goods that have a close relationship in consumption (correct)

    • What does income elasticity measure?

  • Responsiveness of quantity demanded to a change in the price of a related good
  • Responsiveness of quantity supplied to a change in price
  • Responsiveness of quantity demanded to a change in income (correct)
  • Responsiveness of quantity supplied to a change in income

    • How do substitutes impact each other's demand?

    <p>They cause an increase in demand for each other</p> Signup and view all the answers

    What is the relationship between price elasticity of demand and total spending?

    <p>Increase in price elasticity leads to a decrease in total spending</p> Signup and view all the answers

    When the price of a good falls, what effect is greater?

    <p>Substitution effect</p> Signup and view all the answers

    What does the substitution effect suggest when the price of a good rises?

    <p>Buy less</p> Signup and view all the answers

    For an inferior good, what does the income effect indicate when the price rises?

    <p>Buy more</p> Signup and view all the answers

    When the price of a complementary good falls, what is likely to happen to the demand for the main good?

    <p>Increase</p> Signup and view all the answers

    How does the income elasticity of demand differ for normal goods and inferior goods?

    <p>It is positive for normal goods and negative for inferior goods</p> Signup and view all the answers

    In terms of price elasticity, which type of goods have more elastic demand?

    <p>Luxury goods</p> Signup and view all the answers

    What is the total value of the 20 T-shirts bought at a price of $7 each?

    <p>$220</p> Signup and view all the answers

    If the price of T-shirts rises, what generally happens to consumer surplus?

    <p>It decreases</p> Signup and view all the answers

    What concept is used to measure how demand for one good responds to a change in the price of another?

    <p>Cross-price elasticity of demand</p> Signup and view all the answers

    If two goods are complements, what happens when the price of one good increases?

    <p>Demand for one good increases, and for the other it decreases</p> Signup and view all the answers

    What does price elasticity of demand measure?

    <p>How demand responds to price changes</p> Signup and view all the answers

    Which concept measures how responsive quantity demanded is to a change in consumer income?

    <p>Income elasticity of demand</p> Signup and view all the answers

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