Title: Calculating Other Elasticities
Course: TEST Course

Q: When income increases and the demand for a good increases, the good is considered a
- inferior good.
- complementary good.
- normal good.
A: normal good.

Q: When income increases and demand for a good falls, the good is considered a
- normal good.
- complementary good.
- inferior good.
A: inferior good.

Q: When a 5% increase in income causes a 3% drop in quantity demanded of a good
- the cross-price elasticity is .6 and the good is an inferior good.
- the income elasticity is 1.67 and the good is a normal good.
- the income elasticity is .6 and the good is an inferior good.
A: the income elasticity is .6 and the good is an inferior good.

Q: When a 10% increase in income causes a 4% increase in quantity demanded of a good
- the price elasticity of demand is .4 and the good is an inferior good.
- the income elasticity is 2.5 and the good is a normal good.
- the income elasticity is .4 and the good is a normal good.
A: the income elasticity is .4 and the good is a normal good.

Q: Sunny expanded her business last year by adding a gift shop in her salon. Because of this addition her income has increased by 13%. Although her income has increased, she has a 9% drop in the quantity demanded of hamburgers. In this example, Sunny’s
- income elasticity is .69 and the good is a normal good.
- cross-price elasticity is 1.44 and the good is an inferior good.
- income elasticity is .69 and the good is an inferior good.
A: income elasticity is .69 and the good is an inferior good.

Q: Joe received a promotion this year at work and now has an income which has increased by 21% since last year. Joe has now increased his quantity demanded of red wine by 7%. In this example, Joe’s
- cross-price elasticity is 3 and the good is an inferior good.
- income elasticity is .33 and the good is an inferior good.
- income elasticity is .33 and the good is a normal good.
A: income elasticity is .33 and the good is a normal good.

Q: Sebastian received a raise this year so his income climbed from $45,000 to $52,000. Last year Sebastian purchased 2 sunglasses. This year he has purchased 7 sunglasses. Assuming that all of the other things remain constant, what type of a good are sunglasses and what type of income elasticity of demand does Sebastian have?
- The sunglasses are an inferior good and the income elasticity of demand is 7.7.
- The sunglasses are a normal good and the income elasticity of demand is .13.
- The sunglasses are a superior good and the income elasticity of demand is 7.7.
A: The sunglasses are a superior good and the income elasticity of demand is 7.7.

Q: Kelly’s salary was bumped up this year after she accepted the new position of Vice President of Marketing. Her income increased from $65,000 to $83,000. Last year Kelly purchased 2 used cars. This year she purchased 0 used cars. Assuming that all of the other things remain constant, what type of a good is a used car and what type of income elasticity of demand does Kelly have?
- A used car is a normal good and the income elasticity of demand is .12.
- A used car is a superior good and the income elasticity of demand is 8.22.
- A used car is an inferior good and the income elasticity of demand is 8.22.
A: A used car is an inferior good and the income elasticity of demand is 8.22.

Q: A 10% decrease in the price of potato chips leads to a 30% increase in the quantity of soda demanded. It appears that
- price elasticity of demand for potato chips is 3.
- price elasticity of demand for soda is 3.
- cross-price elasticity of demand for soda is -3.
A: cross-price elasticity of demand for soda is -3.

Q: Suppose the price of apples increase by 20%, resulting in consumers to purchase 15% more pears. Given this information, it appears that
- price elasticity of demand of apples is 1.33.
- price elasticity of demand of pears is 0.75.
- cross-price elasticity of pears is 0.75.
A: cross-price elasticity of pears is 0.75.

Q: If consumers find cola and iced tea to be substitute goods, then it is likely that
- the goods’ price elasticities of demand are less than one.
- the goods’ income elasticities are less than zero.
- the goods’ cross-price elasticities are greater than zero.
A: the goods’ cross-price elasticities are greater than zero.

Q: Which of the following goods represent a cross-price elasticity likely greater than zero?
- The complementary goods of hot dog sausages and hot dog buns.
- The complementary goods of printers and printer ink.
- The substitute goods of blueberries and strawberries.
A: The substitute goods of blueberries and strawberries.

Q: The cross-price elasticity of demand is ________ for substitute goods and ________ for complementary goods.
- negative; positive
- positive; positive
- positive; negative
A: positive; negative

Q: The ________ is negative for complementary goods and positive for substitute goods.
- price elasticity of demand
- income elasticity of demand
- cross-price elasticity of demand
A: cross-price elasticity of demand

Q: You read an article stating that HTC’s latest cell phone price has increased from $450 to $550. At the same time the quantity demanded for the Samsung Galaxy 7s increases from 1000 to 1850. Calculate the cross price elasticity of demand using the midpoint method. Are these two cell phones complements or substitutes?
- The cross-price elasticity of demand is -2.98 and they are compliments.
- The cross-price elasticity of demand is .33 and they are substitutes.
- The cross-price elasticity of demand is 2.98 and they are substitutes.
A: The cross-price elasticity of demand is 2.98 and they are substitutes.

Q: Epson’s office printer price increased from $97 to $150. At the same time the quantity demanded for printer ink decreased from 260 to 160. Calculate the cross price elasticity of demand using the midpoint method. Are these products complements or substitutes?
- The cross-price elasticity of demand is .90 and they are compliments.
- The cross-price elasticity of demand is 1.11 and they are substitutes.
- The cross-price elasticity of demand is -1.11 and they are compliments.
A: The cross-price elasticity of demand is -1.11 and they are compliments.

Q: Teenage workers are assumed to have ________ labor supply; therefore a 5% increase in wages would result in ________ percentage change in quantity of labor supplied.
- elastic; less
- inelastic; greater
- elastic; greater
A: elastic; greater

Q: Adult workers are assumed to have ________ labor supply and teenage workers are assumed to have ________ labor supply.
- elastic; inelastic
- elastic; elastic
- inelastic; elastic
A: inelastic; elastic

Q: The wage elasticity of labor demand calculation is
- the % change in quantity of labor supplied divided by the % change in wage.
- the % change in wage divided by the % change in quantity of labor demanded.
- the % change in quantity of labor demanded divided by the % change in wage.
A: the % change in quantity of labor demanded divided by the % change in wage.

Q: What is the calculation to solve for the wage elasticity of labor?
- The % change in quantity of labor supplied divided by the % change in wage.
- The % change in wage divided by the % change in quantity of labor demanded.
- The % change in quantity of labor demanded divided by the % change in wage.
A: The % change in quantity of labor demanded divided by the % change in wage.

Q: Tylor, who is 16, is considered part of the ________ labor supply, while Robert, who is 52, is considered part of the ________ labor supply.
- inelastic; elastic
- elastic; elastic
- elastic; inelastic
A: elastic; inelastic

Q: Marge, who is 46, is considered part of the ________ labor supply, while Jessica, who is 17, is considered part of the ________ labor supply.
- elastic; inelastic
- elastic; elastic
- inelastic; elastic
A: inelastic; elastic

Q: If the government wanted to encourage savings by offering a tax break, such a policy would work if the supply curve for financial capital is
- inelastic.
- steep.
- elastic.
A: elastic.

Q: Tax breaks to encourage savings is effective only if the supply curve for financial capital is
- inelastic.
- steep.
- elastic.
A: elastic.