7. If bread and butter are complements in consumptions, which of the following could be the cross price elasticity of demand for bread and butter? a) -1 b) c) +1 d) +2
Q: H7
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- Which of the following causes the cross-elasticity of demand between two goods to be lower?(Faster) a. The greater the income elasticities of demand for the two goods b. The more they are regarded as dissimilar by consumers c. The greater the price elasticities of demand for the two goods d. The greater the difference in price between the two goods5. The demand equation for a good is given by the equation: Q, = 520 – 20P, + 0.6Y + 2.9P, a. Find the price, income and cross price elasticity of demand when P, = 10, Y = = 21 700 and b. Discuss the effect on demand if there were a 20% increase in price c. Discuss the effect on demand if there were a 50% decrease in income7. Using the income elasticity of demand to characterize goods A survey taken by residents from the imaginary town of Draw City tells economists that the following changes result from an 11% fall in income: • A 13% increase in the quantity of kings demanded • A 14% decrease in the quantity of tokens demanded • A 30% decrease in the quantity of clubs demanded Compute the income elasticity of demand for each good and use the dropdown menus to complete the first column in the following table. Then, based on the income elasticities, classify each good as either a normal good or an inferior good. (Hint: Be careful to keep track of the direction of change. The sign of the income elasticity of demand can be positive or negative, and the sign gives important information.) Good Kings Tokens Clubs Income Elasticity of Demand Normal Good or Inferior Good Which of the following three goods is most likely to be classified as a luxury good? Clubs Kings Tokens
- 5. If the price elasticity of demand for a good is 1.5, we would say that its demand is a)inelastic b)elastic c)increasing d)normal10. An economist estimated the cross-price elasticity for peanut butter and jelly to be 1.5 . Based on this information , we know the goods are * a. inferior goods b. complements c. inelastic d. substitutes3. Suppose that as the income level increases by 10% that the quantity demanded of that same item increases by 6%. a. Calculate the income elasticity of demand. b. What two things does the value in a tell you about the good in question?
- 1. Answer both parts of this question. (a) Define the price elasticity of demand and briefly discuss its economic meaning. (b) For demand function x = Ap, show that price elasticity is equal to -7.Which of the following goods are most likely to have a negative cross-price elasticity, ceteris paribus? Oa. ice cream and candy in a snack shop. Ob. ECS2601 textbook and the study guide. C. None of the options is true. Od. ECS2601 textbook and literature textbook.3. If goods R and K have a cross elasticity of -3 and goods R and S have a cross elasticity of 5, then, what relationship exists between goods R and K? between R and S?
- 7. Using the income elasticity of demand to characterize goods A survey taken by residents from the imaginary town of Draw City tells economists that the following changes result from a 10% rise in income: • A 2% increase in the quantity of tokens demanded • A 17% decrease in the quantity of kings demanded • A 34% increase in the quantity of queens demanded Compute the income elasticity of demand for each good and use the dropdown menus to complete the first column in the following table. Then, based on the income elasticities, classify each good as either a normal good or an inferior good. (Hint: Be careful to keep track of the direction of change. The sign of the income elasticity of demand can be positive or negative, and the sign gives important information.) Income Elasticity of Demand Normal Good or Inferior Good Good Tokens Kings Queens Which of the following three goods is most likely to be classified as a luxury good ? O Kings Tokens Queens7. Using the income elasticity of demand to characterize goods Data collected from the economy of Pokerville reveals that a 16% increase in income leads to the following changes: • A 6% increase in the quantity of flops demanded • A 14% decrease in the quantity of spades demanded • A 29% increase in the quantity of houses demanded Compute the income elasticity of demand for each good and use the dropdown menus to complete the first column in the following table. Then, based on its income elasticity, indicate whether each good is a normal good or an inferior good. (Hint: Be careful to keep track of the direction of change. The sign of the income elasticity of demand can be positive or negative, and the sign confers important information.) Good Income Elasticity of Demand Normal or Inferior Good Flops Spades Houses7. Using the income elasticity of demand to characterize goods Data collected from the economy of Cardtown reveals that an 18% increase in income leads to the following changes: • A 29% increase in the quantity of houses demanded • A 17% decrease in the quantity of clubs demanded • A 14% increase in the quantity of horses demanded Compute the income elasticity of demand for each good and use the dropdown menus to complete the first column in the following table. Then, based on its income elasticity, indicate whether each good is a normal good or an inferior good. (Hint: Be careful to keep track of the direction of change. The sign of the income elasticity of demand can be positive or negative, and the sign confers important information.) Good Income Elasticity of Demand Normal or Inferior Good Houses Clubs Horses Which of the following three goods is most likely to be classified as a luxury good ? Houses…