Question

22. Consider two imaginary goods, widgets and gadgets. The cross-price elasticity of demand for widgets with respect to the price of gadgets is +0.5. This tells us that widgets and gadgets are a. Compliments b. Substitutes c. Unrelated in consumption For this condition to hold, 23. Assume that the market demand for widgets is perfectly inelastic. a. There must be no good substitute for widgets, and widgets must be a normal good. b. There must be no good substitute for widgets, and widgets must be a neutral good. c. There must be no good substitute for widgets, and widgets must be an inferior good 24. The Eastern Nebraska distributor of Big Deborah snack cakes estimates that the own-price elasticity of demand for their products is 1.0. If they raise the price of oatmeal sandwich cakes by 1 percent, their total revenue will a. Rise by 1 percent. b. Fall by 1 percent. c. Remain unchanged. 25. A marketing research consultant tells the local Coca-Cola bottling company that Coke Zero is a "normal good." That means a. The income elasticity of Coke Zero is 0.0 b. Households consume fixed amounts of Coke Zero, no matter what their incomes. c. The income elasticity of Coke Zero is greater than 0.0. 26. Which of the following is not a determinant of the demand for a particular good? The prices of related goods. b. Production technology Consumers' tastes. a. c. 27. In any market, equilibrium occurs when a. The quantity supplied is sufficient to fulfill all households' needs b. Suppliers cannot bring any more product to market c. The quantity demanded is equal to the quantity supplied 28. Which of the following would cause a "change in the quantity demanded" of oatmeal? a. A change in the price of oatmeal, ceteris paribus. b. A change in the price of corn flakes, ceteris paribus. c. An endorsement of oatmeal by a sports star, ceteris paribus 29. Which of the following would cause a "change in demand" for oatmeal? a. A change in the price of oatmeal b. A change in the price of corn flakes c. A drought that restricts the amount of oatmeal available for sale 30. If the U.S. Department of Agriculture sets a minimum price for peanuts that is above the equilibrium price, we would expect a. A shortage of peanuts b. A surplus of peanuts c. A change in demand for peanuts 31. If the Chancellor of UNO sets a maximum price for coffee on campus that is below the equilibrium price, we would expect a. A shortage of coffee on campus b. A surplus of coffee on campus A change in students' demand for cups of coffee C.

Answer 1

Q22) option b)

Since cross price elasticity is positive, so it implies that as price of one good rises , then demand for other good will increase .

Hence two goods must be substitutes

Q23) option a)

As demand is independent of price level, so there is no substitute available for the good.

Also it should be a normal good , as income rise, so it's demand also rise

Q24) option C)

As total revenue TR = P*Q

So %∆ in TR = %∆ in P + %∆ in Q

So as elasticity is 1, so if Price rise by 1% , then Q falls by 1%

So %∆ in TR = zero

Total revenue is unchanged

Q25) option c)

Normal good imply that as income rise, it's consumption rise .

As income elasticity = %∆ in Q Demanded/ % ∆ in income

So income elasticity should be positive for normal good, so it is greater than zero

Q26) option b)

Demand has nothing to do with production technology.

Q27) option c)

At eqm, Q demand = Q supplied

Q28) option a)

Q29) option b)

Q30) option b) surplus

Q31) option a) shortage