Choose the Correct Answer 1. An inferior good is one for which an increase in in
ID: 1222659 • Letter: C
Question
Choose the Correct Answer
1. An inferior good is one for which an increase in income causes a(n)
a. Decrease in demand
b. Increase in supply
c. Decrease in supply
d. Increase in demand
2. If a small percentage increase in the price of a good greatly reduces the quantity demanded for that good, the demand for the good is
a. Price inelastic
b. Unit price elastic
c. Income inelastic
d. Price elastic
3. If an increase in the price of blue jeans leads to an increase in the demand for tennis shoes, then blue jeans and tennis shoes are:
a. Complements
b. Substitutes
c. Normal goods
d. Inferior goods
4. If the income elasticity of demand for a good is negative, it must be
a. A luxury good
b. An inferior good
c. A normal good
d. An elastic good
5. If consumers think that there are very few substitutes for a good, then
a. Supply would tend to be price elastic
b. Supply would tend to be price inelastic
c. Demand would tend to be price elastic
d. Demand would tend to be price inelastic
6. If the demand for a given product is inelastic, a 3 percent increase in the price will
a. Decrease the quantity demanded by more than 3 percent
b. Increase the quantity demanded by more than 3 percent
c. Decrease the quantity demanded by less than 3 percent
d. Increase the quantity demanded by less than 3 percent
7. A decrease (leftward shift) in the supply for a good will tend to cause
a. An increase in the equilibrium price and quantity
b. A decrease in the equilibrium price and quantity
c. A decrease in the equilibrium price and an increase in the equilibrium quantity
d. An increase in the equilibrium price and a decrease in the equilibrium quantity
8. Which of the following shifts the demand for watches to the right?
a. A decrease in the price of watches
b. A decrease in consumer incomes if watches are a normal good
c. A decrease in the price of watch batteries if watch batteries and watches are complements
d. An increase in the price of watches
9. Which of the following would cause a demand curve for a good to be price inelastic?
a. There are a great number of substitutes for the good
b. The good is necessity
c. The good is inferior
d. The good is a luxury
10. Suppose there is an increase in both the supply and demand for personal computers. In the market for personal computers, we would expect the
a. Equilibrium quantity to rise and the equilibrium price to rise
b. Equilibrium quantity to rise and the equilibrium price to fall
c. Equilibrium quantity to rise and the equilibrium price to remain constant
d. Equilibrium quantity to rise and the change in the equilibrium price to be ambiguous
Explanation / Answer
(1) (a)
For an inferior good, an increase (decrease) in income will lead to a decrease (increase) in its demand.
(2) (d)
If a small % increase in price decreases quantity demanded by a large (small) percentage, demand is elastic (inelastic).
(3) (b)
If increase in price of good X leads to an increase (decrease) in demand for good Y, then goods X and Y are substitutes (complements).
(4) (b)
For an inferior (normal) good, income elasticity is negative (positive).
NOTE: As per Chegg Answering Policy, first 4 questions are answered.