INCOME AND CROSS ELASTICITY 1. The more substitutes available for a pro u!

t" A) the larger is its income elasticity of demand. B) the smaller is its income elasticity of demand. C) the smaller is its price elasticity of demand. D) the larger is its the price elasticity of demand

#. The !ross elasti!it$ of ema% measures the respo%sive%ess of the &ua%tit$ ema% e of a parti!ular 'oo to !ha%'es i% the pri!es of A) its complements but not its substitutes. B) its substitutes but not its complements. C) its substitutes and its complements. D) neither its substitutes nor its complements.

(. If 'oo s are !ompleme%ts" efi%itel$ their A) income elasticities are negative. C) cross elasticities are positive. B) income elasticities are positive. D) cross elasticities are negative.

). The !ross elasti!it$ of ema% bet*ee% apples a% ora%'es is efi%e as A) the price elasticity of demand for apples divided by the price elasticity of demand for oranges. B) the change in the quantity of apples demanded divided by the change in the quantity of oranges demanded. C) the percentage change in the quantity of apples demanded divided by the percentage change in the price of oranges. D) the percentage change in the quantity of apples demanded divided by the percentage change in the quantity of oranges demanded.

+. If the !ross elasti!it$ of ema% bet*ee% 'oo s A a% , is positive" A) the demands for A and B are both price elastic. B) A and B are complements. C) A and B are substitutes. D) the demands for A and B are both price inelastic.

-. If the !ross elasti!it$ of ema% bet*ee% 'oo s A a% , is %e'ative" A) the demands for A and B are both price elastic. B) A and B are complements. C) the demands for A and B are both price inelastic. .. If 'oo s A a% , are !ompleme%ts" A) the cross elasticity of demand between A and B is negative. B) the cross elasticity of demand between A and B is positive. C) their income elasticities of demand are both less than 1. D) their income elasticities of demand are both greater than 1. /. If a rise i% the pri!e of 'oo , i%!reases the &ua%tit$ ema% e of 'oo A" A) B is a substitute for A, but A is a complement to B. B) A is a substitute for B, but B is a complement to A. C) A and B are complements. D) A and B are substitutes. 0. If a fall i% the pri!e of 'oo A i%!reases the &ua%tit$ ema% e of 'oo ," A) A and B are substitutes. B) A and B are complements. C) B is a substitute for A, but A is a complement to B. D) A is a substitute for B, but B is a complement to A. 11. The !ross elasti!it$ of ema% bet*ee% Co!a2Cola a% 3epsi2Cola is A) positive, that is, Co e and !epsi are complements. B) negative, that is, Co e and !epsi are complements. C) positive, that is, Co e and !epsi are substitutes. D) negative, that is, Co e and !epsi are substitutes. 11. The i%!ome elasti!it$ of ema% is the per!e%ta'e !ha%'e i% A) income divided by the percentage change in price. B) the quantity demanded divided by the percentage change in income. C) the price divided by the percentage change in income. D) income divided by the percentage change in quantity demanded. 1#. Dema% is i%!ome elasti! if A) an increase in income will not affect the quantity demanded. B) a small percentage increase in income will result in a large percentage increase in quantity demanded.

C) the good in question has close substitutes. D) a large percentage increase in income will result in a small percentage increase in quantity demanded. 1(. The i%!ome elasti!it$ of ema% is hi'h for A) shelter. B) lu"uries. C) clothing. D) food. 1). To sa$ that tur%ips are i%ferior 'oo s mea%s that the i%!ome elasti!it$ A) is definitely greater than 1. B) is negative. C) is positive but could be greater than or less then #or equal to) 1. D) is definitely between $ and 1. 1+. A% i%!rease i% Abi'ail4s i%!ome e!reases her ema% for !assette tapes. 5or her" !assette tapes are A) a complement to any good. C) an inferior good. B) a normal good. D) a substitute good

1-. 6oo s *hose i%!ome elasti!ities are %e'ative are !alle A) superior goods. B) inferior goods. C) normal goods. D) complements.

1.. A 11 per!e%t i%!rease i% i%!ome has !ause a + per!e%t e!rease i% the &ua%tit$ ema% e . The i%!ome elasti!it$ is A) $.%. B) &'.$. C) '.$. D) &$.%. 1/. Deb4s i%!ome has 7ust rise% from 80+1 per *ee9 to 81"1+1 per *ee9. As a result" she e!i es to i%!rease the %umber of movies she atte% s ea!h mo%th b$ + per!e%t. :er ema% for movies is A) income inelastic. C) represented by a vertical line. B) income elastic. D) represented by a hori(ontal line.

10. 5re 4s i%!ome has 7ust rise% from 80)1 per *ee9 to 81"1-1 per *ee9. As a result" he e!i es to pur!hase 0 per!e%t more stea9 per *ee9. The i%!ome elasti!it$ of 5re 4s ema% for stea9 is A) $.)%. B) 1.**. C) $.+$. D) 1.$$.

#1. ;oa%4s i%!ome has 7ust rise% from 80)1 per *ee9 to 81"1-1 per *ee9. As a result" she e!i es to pur!hase 1# per!e%t more lettu!e per *ee9. The i%!ome elasti!it$ of ;oa%4s ema% for lettu!e is A) 1.**. B) $.+$. C) 1.$$. D) $.)%.

#1. A 11 per!e%t i%!rease i% i%!ome !auses the &ua%tit$ of ora%'e 7ui!e ema% e to i%!rease from 10"#11 to #1"/11 'allo%s. The i%!ome elasti!it$ of ema% for ora%'e 7ui!e is A) $.,. B) 1.'. C) 1.$. D) $.%. ##. A 11 per!e%t i%!rease i% i%!ome !auses the &ua%tit$ of apple 7ui!e ema% e to i%!rease from 1/"/11 to #1"#11 'allo%s. The i%!ome elasti!it$ of ema% for apple 7ui!e is A) $.%. B) 1.$. C) 1.'. D) $.,.

#(. The above fi'ure sho*s a 'oo A) that is an inferior good over all income ranges. B) whose income elasticity is greater than $ but less than 1. C) that is a normal good over some income ranges and an inferior good over other ranges. D) whose income elasticity always e"ceeds 1.$.

#). The above fi'ure sho*s a 'oo A) whose income elasticity is greater than $ but less than 1. B) that is an inferior good over all income ranges. C) whose income elasticity always e"ceeds 1.$. D) that is a normal good over some income ranges and an inferior good over other ranges.