Question

2. Income?Qd of Hamburger??Qd of Steak

Per month? per month?per month

Month 1?$750?8 lbs.?2 lbs.

Month 2?$950? 5 lbs.?4 lbs.

a. What is the income elasticity of demand for hamburgers?

b. What is the income elasticity of demand for steak?

c. From our study of demand in an earlier chapter, we know ___________is a normal good, whereas _______________is an inferior good.

 

3. Suppose the price of Butter Pecan Ice Cream has recently risen by 10% due to an increase in the cost of pecans used to make the ice cream. As a result, fewer Butter Pecan ice cream cones are being sold in the ice cream store where you work. You do some checking and find that Raspberry Chip ice cream cone sales are up 4%. What is the cross-price elasticity of Butter Pecan and Raspberry Chip ice cream cones? Are these two goods complements or substitutes?

 

12. If the price rises, the quantity supplied will be greater the

a. Longer the time that elapses.

b. More income elasticity is good.

c. Higher the price elasticity of demand for the good.

d. All of the above.

 

13. If the price elasticity of demand is -.5 and quantity demanded increases by 5%, the price must have

a. Increase by 10%

b. Decreased by 10%

c. Increased by 2.5%

d. Decreased by 2.5%