normal goods or inferior goods. If a 4 percent 9. By its definition, the income
ID: 1104318 • Letter: N
Question
normal goods or inferior goods. If a 4 percent 9. By its definition, the income elasticity of demand can tell us whether goods are inc rease in income results in a 9 percent decrease in the quantity demanded, then the income elasticity of demand for this particular hegative and therefore this good is an inferior good. good is positive and there fore this good is an inferior good good 10. By its definition, the cross-price elasticity of demand can tell us whether goods are complements or substitutes. If a 4 percent increase in the price of good X' results in a 9 percent increases in the quantity demanded of good Y, then the cross-price elasticity of demand for the goods Xand Yis C. negative and therefore the goods X and Y'are complementary.& pbsitive and therefore the goods X and Y are substitutable. therefore the goods Xand Yare substitutable. itive and therefore the goods X and Y are complementary 11. A key determinant of the price elasticity of supply is the time period under consideration. Generally, a firm is more willing and capable to change quantity supplied in response to a price change whern bsupply is inelastic. ·supply is unit elastic. a supply is elastic. 12. Suppose demand is relatively elastic while supply is perfectly inelastic, and the demand of the good in question decreases. As a a, buyers' total expenditure on the good is unchanged. (dthe relevant time period i short rather than long. the equilibrium quantity and the equilibrium price both are unchanged c. the equilibrium price increases, and the equilibrium quantity is unchanged. d. the equilibrium quantity decreases, and the equilibrium price is unchanged. 13. The presence of price controls in a market usually is an indication that policymakers believed that the equilibrium price determined by the market is unfair to would NOT be consistent with a binding price floor in a market? buyers or sellers. If the government imposes a price floor, which of the following observations A smaller quantity of the good is bought after the price floor becomes effective than before the price floor became effective. a. A lager quantity of the good is supplied after the price floor becomes effective than before the price floor became effective. larger total revenue received by producers after the price floor becomes effective than before the price floor became effective. market would experience a large shortage after the price floor becomes effective than before the price floor became effective. Figure#1: price 24 20 18 12 10 2 2 4 6 8 10 12 14 16 18 20 quantity 14. Refer to Figure#1. For a price floor to bee a. any price above $10.00 c. a price between $6.00 and $8.00 tively binding, it would have to be set at b a price between $8.00 and S10.00. d. any price below $10.00 15. Refer to Figure#1. Suppose a price ceiling of$8.00 is imposed. As a result, a, sellers' total sale increases by $36.00 ellers, total sale increases by $64.00. b. sellers' total sale decreases by $36.00 d. sellers' total sale decreases by $64.00.Explanation / Answer
First question is answered below
1.
Correct option: (b) negative and therefore the good is inferior
Reason: Income elasticity of demand equals % change in quantity demanded divided by % change in income.
For normal goods, this is positive while for inferior goods this is negative.
In the given case, IED = -9/4 = -2.25
Thus elasticity is negative and hence good is inferior since its demand is falling with increase in income.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.