1) If your purchases of shoes increase from 9 pairs per year to 11pairs per year
ID: 1242065 • Letter: 1
Question
1) If your purchases of shoes increase from 9 pairs per year to 11pairs per year when your income increases from $19,000 to $21,000 ayear, then your income elasticity of demand for shoes is:a) 2
b) -0.67
c) 0
d) 0.67
2) If your purchases of shoes decrease from 11 pairs per year to 9pairs per year when your income increases from $19,000 to $21,000 ayear, then your income elasticity of demand for shoes is:
a) -2
b) -0.67
c) 0.67
d) 2
3) The income elasticity of demand for eggs has been estimated tobe 0.57. If income grows by 5% in a period, how will that affectdemand for eggs in that period, all other things unchanged?
a)demand will increase by more than 5.7percent
b) demand will increase by about 2.9 percent
c) demand will decrease by more than 5.7 percent
d) demand will decrease
4) The income elasticity of demand for ground beef has beenestimated to be -0.197. If income falls by 10percent in a period,how will that affect total expenditures on ground beef in thatperiod, all other things unchanged?
a) total expenditures will rise
b) total expenditures will remain unchanged
c) total expenditures will fall
d) not enough information is given to answer the question
5) The pair of items that is most likely to have a negative crossprice elasticity of demand is:
a) aspirin and hamburgers
b) hot dogs and mustard
c) margarine and butter
d) catsup and whiskey
6) If the price of chocolate-covered peanuts increases and thedemand for strawberries does not change, this indicated that thesetwo goods are:
a) unrelated goods
b) inferior goods
c) substitute goods
d) complementary goods
Explanation / Answer
1. a
2. a
3. b ( 0.57*0.05)
4. a (because demand for beef increse)
5. b(price of hot dog increase, but demand for mustard decreasecause decrease in demand for hot dog)
6. a
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