Answered: When the demand for bread is positively…

When the demand for bread is positively related to the quantity demanded for eggs, then these two products are __________. a. Normal goods b. Substitute goods c. Complementary goods d. Inferior goods

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter5: Elasticity

Section: Chapter Questions

Problem 31CTQ: Economists define normal goods as having a positive income elasticity. We can divide normal goods...

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Concept explainers

Normal and Inferior Goods

Understanding a normal good and an inferior good is important because it tells us what will happen to demand different products during booms and recessions.

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9. When the demand for bread is positively related to the quantity demanded for eggs, then these two products are __________.

Normal goods

Substitute goods

Complementary goods

Inferior goods

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Economists define normal goods as having a positive income elasticity. We can divide normal goods into two types: Those whose income elasticity is less than one and those whose income elasticity is greater than one. Think about products that would fall into each category. Can you come up with a name for each category?
1. If substitutes are not readily available for a product, it has A. Inelastic demand. B. Elastic demand. ... 1... C. An income effect. D. A substitution effect. 2. A price increase causes a fall in a company's total revenue. This indicates that demand for the company's products is A. Steady B. Elastic C. Inelastic D. Fluctuating 3. Which direction will the demand curve shift if consumers' income rise? A. To the right B. To the left C. Upward D. Downward
4. Suppose that a decrease in the price of X results in more of good Y sold. What are X and Y called? a. complementary goods b. normal goods c. inferior goods d. substitute goods
1. Classify each pair of goods as substitutes, complements, or independent. - shoes and sandals - beef and chicken - peanut butter and lumber - wine and cheese - tables and chairs - shampoo and conditioner
13. Refer to the diagram below. Good Y U, YA U. Xg XA Good X The budget line shift that moves the consumer's equilibrium from point A to point B suggests: A. a decrease in the quantity demanded for product X. B. a decrease in the demand for product X. C. no change in the demand for product X. D. that X is an inferior good.
4. Describe what is meant by a normal good. Provide a real-life example in your own words. What is an inferior good? How does a change in income impact the demand for inferior goods?
6. Part a and Part B
Identify the type of goods which have zero cross elasticity of demand. a. Normal goods b. Independent goods c. Dependent goods d. Substitute goods
Explain the general determinants in one paragraph. GENERAL DETERMINANTS OF DEMAND• Good’s own price (P) is the key determinant of demand• Other determinants of demand:1. Level of income (Y) of the potential purchasers of the good or service.a. Normal good – a good in which an increase in income raises its sales.b. Inferior good – a good in which an increase in income causes a reduction in spending.2. Prices of related goodsa. Substitute good – a good in which can substitute for another good (competitor’sgood). An increase in the price of the substitute good or service causes an increase indemand for the another good.b. Complementary good – a good that complements with another good. That is, anincrease in demand for one causes an increase in demand for the other. An increase inthe price of a complementary good reduces demand for the another good.3. Population (number of consumers that consume goods/services)4. Tastes and preferences5. Consumer’s expectation towards future market…
6. If a decrease in the price of Good X causes a decrease in the demand for Good Y, we can conclude that a. Goods X is a normal good while Y is an inferior good. b.Goods X and Y are complement goods. c. Goods X and Y are normal goods. d. Goods X and Y are substitute goods.
Q.2 Which two pairs of goods likely have a relatively weak negative cross price elasticity for most people? Select one: a. Peanut butter and computers. b. Sprite and Coca Cola. c. Sausages and ketchup. d. Beef and fish. e. chocolate milk and skim milk.
1. A substitute product is defined as a product that can be used for a similar purpose as theother product. The common example substitutes are butter and margarine. If the price ofbutter increases while that of margarine remain constant, use the demand curve toillustrate the effects of an increase in the price of butter to the demand for margarine.