30 Questions
Which variable does income elasticity of demand measure the sensitivity of?
Quantity demanded
What is the formula for income elasticity of demand?
EI_d = %ΔQx_d / %ΔI
What does a positive income elasticity of demand indicate?
Quantity demanded increases as income increases
What does a negative income elasticity of demand indicate?
Quantity demanded decreases as income increases
What type of goods have positive income elasticity?
Normal goods
What type of goods have negative income elasticity?
Inferior goods
How does a rise in income affect the demand curve for normal goods?
Shifts the demand curve upward and to the right
Which of the following equations represents the cross-price elasticity of demand?
$E_{pyd} = % \Delta Q_x / % \Delta P_y$
When the cross-price elasticity of demand between two goods is positive, they are considered as:
Substitutes
When the cross-price elasticity of demand between two goods is negative, they are considered as:
Complements
What does the market demand function represent?
The sum of individual consumers' demand functions
To calculate the quantity demanded using the market demand function, what values do we need to insert?
Actual values for Px, I, and Py
What is the formula for calculating the own-price elasticity of demand?
$E_{pxd} = % \Delta Q_x / % \Delta P_x$
What does a positive own-price elasticity of demand indicate?
Elastic demand
According to the text, what is the own-price elasticity of demand for gasoline at a price of €1.48?
-0.20%
Based on the information provided, how would you characterize the demand for gasoline at a price of €1.48?
Inelastic
According to the text, what is the income elasticity of demand for gasoline?
0.26%
Based on the information provided, how would you characterize gasoline as a good?
Normal good
According to the text, what is the cross-price elasticity of demand between gasoline and automobiles?
-0.84
Based on the information provided, how would you characterize the relationship between gasoline and automobiles?
Complements
According to the text, what is the law of demand?
An increase in price leads to a decrease in quantity demanded
Which of the following best describes the income effect for normal goods?
Consumers buy less of the good when their income rises
Which of the following best describes the income effect for inferior goods?
Consumers buy more of the good when their income rises
Which of the following best describes the substitution effect for normal goods?
Consumers buy more of the good when its price falls
Which of the following best describes the substitution effect for inferior goods?
Consumers buy less of the good when its price falls
Which of the following best describes the income elasticity of demand for normal goods?
Positive
Which of the following best describes the income elasticity of demand for inferior goods?
Negative
Which of the following best describes the relationship between income and demand for normal goods?
Direct
Which of the following best describes the relationship between income and demand for inferior goods?
Inverse
Which of the following best describes the demand curve for normal goods?
Negatively sloped
Test your understanding of elasticity concepts with this quiz! Learn about own-price elasticity, income elasticity, and cross-price elasticity. Challenge yourself to calculate elasticity values and interpret their meanings in different scenarios.
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