SS5 Grade Increment

If there are very few, if any, good substitutes for good A, then________________.

• supply of good A would tend to be price elastic

• demand for good A would tend to be price elastic

• demand for good A would tend to be price inelastic

• demand for good A would tend to be income elastic

Suppose that an increase in the price of good T from P1.20 to P1.40 per pound raises the amount of carrots that carrot farmers are willing to supply from 1.2 million pounds to 1.6 million pounds. Using the midpoint method, what would be the elasticity of supply?

• 0.50

• 0.54

• 1.86

• 2.00

The cross-price elasticity of demand determines whether goods are ________________.

• normal or inferior

• elastic or inelastic

• luxuries or necessities

• complements or substitutes

If two supply curves pass through the same point and one is steep and the other is flat, which of the following would be correct?

• The flatter supply curve is more elastic.

• The steeper supply curve is more elastic.

• The elasticity of supply will be the same for both curves.

• It is impossible to tell the elasticity of supply for either curve unless you are given actual numbers to compute the elasticity of both curves.

If the cross elasticity of demand for good A with respect to good B is +2.7, then good A is a/n________________.

• normal good

• inferior good

• substitute for good B

• complement to good B

If Anna, a PhD student in Stanford bought 16 cotton blouses last year when her income was $38,000 and she buys 22 cotton blouses this year when her income is $35,000, then her income elasticity of demand is ________________.

• -3.84

• +3.84

• -0.26

• +0.26

If a rise in the price of good 1 decreases the quantity demanded of good 2, then, _______________.

• good 1 is an inferior good

• good 2 is an inferior good

• the cross elasticity of demand is negative

• the cross elasticity of demand is positive

For a normal good with a downward sloping demand curve, the price elasticity of demand is ________________.

• positive; the income elasticity of demand is positive

• negative; the income elasticity of demand is positive

• positive; the income elasticity of demand is negative

• negative; the income elasticity of demand is negative

Demand is income elastic if _________________.

• the good in question has close substitutes

• an increase in income will not affect the quantity demanded

• a large percentage increase in income will result in a small percentage increase in quantity demanded

• a small percentage increase in income will result in a large percentage increase in quantity demanded

Economists usually assume that money has _____________ marginal utility.

• zero

• constant

• increasing

• decreasing