Elasticity Concepts Quiz

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Questions and Answers

Which variable does income elasticity of demand measure the sensitivity of?

  • Other variables
  • Quantity demanded (correct)
  • Consumer income
  • Price

What is the formula for income elasticity of demand?

  • EI_d = %ΔQx_d / %ΔI (correct)
  • EI_d = %ΔQx_d * %ΔI
  • EI_d = %ΔQx_d - %ΔI
  • EI_d = %ΔQx_d + %ΔI

What does a positive income elasticity of demand indicate?

  • Quantity demanded increases as income increases (correct)
  • Quantity demanded is not affected by changes in income
  • Quantity demanded is affected by changes in other variables
  • Quantity demanded decreases as income increases

What does a negative income elasticity of demand indicate?

<p>Quantity demanded decreases as income increases (A)</p> Signup and view all the answers

What type of goods have positive income elasticity?

<p>Normal goods (B)</p> Signup and view all the answers

What type of goods have negative income elasticity?

<p>Inferior goods (A)</p> Signup and view all the answers

How does a rise in income affect the demand curve for normal goods?

<p>Shifts the demand curve upward and to the right (A)</p> Signup and view all the answers

Which of the following equations represents the cross-price elasticity of demand?

<p>$E_{pyd} = % \Delta Q_x / % \Delta P_y$ (A)</p> Signup and view all the answers

When the cross-price elasticity of demand between two goods is positive, they are considered as:

<p>Substitutes (B)</p> Signup and view all the answers

When the cross-price elasticity of demand between two goods is negative, they are considered as:

<p>Complements (D)</p> Signup and view all the answers

What does the market demand function represent?

<p>The sum of individual consumers' demand functions (D)</p> Signup and view all the answers

To calculate the quantity demanded using the market demand function, what values do we need to insert?

<p>Actual values for Px, I, and Py (C)</p> Signup and view all the answers

What is the formula for calculating the own-price elasticity of demand?

<p>$E_{pxd} = % \Delta Q_x / % \Delta P_x$ (D)</p> Signup and view all the answers

What does a positive own-price elasticity of demand indicate?

<p>Elastic demand (C)</p> Signup and view all the answers

According to the text, what is the own-price elasticity of demand for gasoline at a price of €1.48?

<p>-0.20% (D)</p> Signup and view all the answers

Based on the information provided, how would you characterize the demand for gasoline at a price of €1.48?

<p>Inelastic (A)</p> Signup and view all the answers

According to the text, what is the income elasticity of demand for gasoline?

<p>0.26% (C)</p> Signup and view all the answers

Based on the information provided, how would you characterize gasoline as a good?

<p>Normal good (A)</p> Signup and view all the answers

According to the text, what is the cross-price elasticity of demand between gasoline and automobiles?

<p>-0.84 (D)</p> Signup and view all the answers

Based on the information provided, how would you characterize the relationship between gasoline and automobiles?

<p>Complements (C)</p> Signup and view all the answers

According to the text, what is the law of demand?

<p>An increase in price leads to a decrease in quantity demanded (A)</p> Signup and view all the answers

Which of the following best describes the income effect for normal goods?

<p>Consumers buy less of the good when their income rises (D)</p> Signup and view all the answers

Which of the following best describes the income effect for inferior goods?

<p>Consumers buy more of the good when their income rises (D)</p> Signup and view all the answers

Which of the following best describes the substitution effect for normal goods?

<p>Consumers buy more of the good when its price falls (B)</p> Signup and view all the answers

Which of the following best describes the substitution effect for inferior goods?

<p>Consumers buy less of the good when its price falls (A)</p> Signup and view all the answers

Which of the following best describes the income elasticity of demand for normal goods?

<p>Positive (B)</p> Signup and view all the answers

Which of the following best describes the income elasticity of demand for inferior goods?

<p>Negative (D)</p> Signup and view all the answers

Which of the following best describes the relationship between income and demand for normal goods?

<p>Direct (C)</p> Signup and view all the answers

Which of the following best describes the relationship between income and demand for inferior goods?

<p>Inverse (A)</p> Signup and view all the answers

Which of the following best describes the demand curve for normal goods?

<p>Negatively sloped (D)</p> Signup and view all the answers

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