CHAPTER 4: Elasticity
MULTIPLE CHOICE
1. Price elasticity of demand measures the change in
a. quantity demanded due to the change in price.
b. demand due to the change in price.
c. quantity demanded due to the change in price of another good or service.
d. price due to a change in quantity demanded.
e. price due to the change in demand.
2. What does the price elasticity of demand measure?
a. what direction the demand curve shifts when the income changes
b. what direction the demand curve shifts when the price changes
c. how much the demand curve shifts when the price changes
d. a producer’s sensitivity to a price change
e. a consumer’s sensitivity to a price change
3. The reason that someone buys a lot more paintings when the price of art falls is that
a. there are many substitutes for paintings.
b. paintings are a necessity.
c. they complement his or her home décor.
d. his or her income has risen.
e. art is a luxury.
4. If a friend says, “I am never going to buy another Avicii remix again!” his or her price elasticity of
demand for Avicii remixes is
a. perfectly elastic. d. inelastic.
b. perfectly inelastic. e. unitary elastic.
c. elastic.
5. From the accompanying table, we would expect that, for recreational skaters, the price elasticity of
demand for ice skates between $10 and $20 to be ________ than that of hockey players because
________.
Price of Ice Skates Quantity Demanded (hockey players)
Quantity Demanded (recreational skaters)
$10 95 70
$20 85 50
$40 75 35
$50 65 45
$60 60 50
a. more elastic; ice skates are a normal good
b. less elastic; ice skates are an inferior good
c. the same; they both skate
d. more elastic; recreational skaters can substitute other activities
e. less elastic; hockey players need skates
6. Salima is a devoted Coca-Cola consumer, whereas Antonia can drink either Coca-Cola or Pepsi
products. Salima’s demand for Coca-Cola will be relatively more ________, while Antonia’s
demand will be relatively more ________.
a. elastic; inelastic d. inelastic; elastic
b. unrelated to price; elastic e. unitary elastic; inelastic
c. perfectly elastic; elastic
7. Assume that a family spends 35 percent of its income on housing, 20 percent on travel-related
expenses, 10 percent on utilities, 25 percent on health care, and 5 percent on miscellaneous items.
Demand for which category will be most responsive to a change in price?
a. miscellaneous d. travel-related expenses
b. health care e. housing
c. utilities
8. Lewis has a fixed budget and buys all of the items listed below. When will a 20 percent reduction
in price cause him to change the amount he buys the most?
a. scented candles, regular price is $25
b. jasmine rice, regular price is $4/lb
c. GAP jeans, regular price is $75
d. flat-screen LCD TV, regular price is $400
e. living room couch, regular price is $300
9. Which of the following would NOT affect a good’s price elasticity of demand?
a. whether the good is a necessity
b. the proportion of the budget devoted to the good
c. the number of substitute goods
d. the ease of substituting between the goods
e. the cost of producing the good
10. Suppose that when the price of cereal rises 10 percent, the quantity demanded of cereal falls by 5
percent. Based on this information, what is the approximate price elasticity of demand for cereal?
a. 0.5 d. −2.0
b. −0.5 e. 0
c. 2.0
11. When the price increases by 30 percent and the quantity demanded drops by 30 percent, the price
elasticity of demand is
a. perfectly inelastic. d. elastic.
b. inelastic. e. perfectly inelastic.
c. unitary elastic.
12. Price elasticity of demand is measured as the
a. change in quantity demanded divided by the change in price.
b. change in price divided by the change in quantity demanded.
c. percentage change in price divided by the percentage change in quantity demanded.
d. percentage change in demand divided by the percentage change in income.
e. percentage change in quantity demanded divided by the percentage change in price.
13. Nicolette raised her quantity demanded of hockey pucks from 100 to 150 when the price fell from
$5 to $3 per puck. Using the midpoint method, her price elasticity of demand is
a. 0.80. d. 0.40.
b. −1.25. e. −0.80.
c. −1.00.
14. When the price of scooters drops by 5 percent, the quantity demanded changes by 20 percent. We
know that the price elasticity of demand for scooters is
a. perfectly inelastic. d. elastic.
b. inelastic. e. perfectly elastic.
c. unitary elastic.
15. At a price of $2, the quantity demanded for pens is 12. When the price increases to $3, the quantity
demanded for pens is 10. The price elasticity of demand for pens is
a. perfectly inelastic. d. elastic.
b. inelastic. e. perfectly elastic.
c. horizontal.
16. At a price of $5/hour, Karina wants to hire three workers. When the price rises to $7/hour, she
wants to hire only two workers. Karina’s price elasticity of demand for workers is
a. − 0.83. d. − 0.40.
b. −1.20. e. − 0.10.
c. − 0.33.
17. If the elasticity of demand for Good A is −3, a 33 percent decrease in quantity demanded of Good
A results from a(n) ________ in the price of Good A.
a. 99 percent decrease d. 11 percent increase
b. 99 percent increase e. 33 percent decrease
c. 11 percent decrease
18. Zumba classes sell 20 participant spots at a price of $4.50 each. When the instructor raised the
prices to $5.50, 10 people attended the class. From the midpoint method, the price elasticity of
demand for Zumba is
a. − 0.50. d. 0.20.
b. −3.33. e. − 0.20.
c. −2.50.
19. Celine runs a sporting goods store and knows that the price elasticity of demand for her sports
clothing line is −1.5. She is planning to lower prices by 10 percent. The percentage change in
quantity demanded will be
a. 15 percent. d. 0.06 percent.
b. 0.15 percent. e. 8.50 percent.
c. 6.66 percent.
20. In the accompanying table, assume that the price of ice skates increases from $10 to $20 per pair.
Using the midpoint method, what is the price elasticity of demand for ice skates for hockey
players?
Price of Ice Skates Quantity Demanded (hockey players) Quantity Demanded
(recreational skaters)
$10 95 70
$20 85 60
$40 75 45
$50 65 25
$60 60 10
a. − 6.00 d. − 0.16
b. 0.67 e. 3.00
c. 0.11
21. If the cross-price elasticity between Good A and Good B is −1.5 and the percentage change in
quantity demanded of Good B is 15 percent, what is the percentage change in the price of Good A?
a. −10 percent d. −1 percent
b. − 0.10 percent e. 11.50 percent
c. −11.50 percent
22. A producer knows that the price elasticity for his product is −0.5. He wants to increase quantity
demanded by 30 percent. By what percentage does he need to change the price?
a. 10 percent d. − 60 percent
b. 6 percent e. − 6 percent
c. − 9.5 percent
23. If the price elasticity of demand for Good A is − 0.2 and the price increases from $2.25 to $2.75,
the percentage change in the quantity demanded of Good A is
a. −100 percent.
b. 100 percent.
c. 4.0 percent
d. − 4.0 percent.
e. unknown because not enough information is provided.
24. Refer to the accompanying table. When the price drops from $5 to $3, price elasticity of demand
for sushi (using the midpoint method) at an income of $30,000 is
Price
(per roll) Quantity Demanded (income = $10,000/year) Quantity Demanded (income =
$30,000/year)
$1 5 9
$2 4 8
$3 3 7
$4 2 6
$5 1 5
a. 0.71. d. 0.33.
b. 0.67. e. − 0.67.
c. 0.10.
25. The price elasticity of demand is always
a. positive. d. equal to zero.
b. negative. e. equal to infinity.
c. equal to −1.
26. If the price elasticity of demand is − 4.0, a 5 percent decrease in price will increase quantity
demanded by
a. 0.8 percent. d. 80 percent.
b. 1.25 percent. e. 125 percent.
c. 20 percent.
27. When the quantity demanded is less sensitive to a change in price, then the absolute value of the
price elasticity of demand is
a. smaller.
b. larger.
c. close to infinity.
d. close to 1.
e. unaffected by the change in sensitivity.
28. When the price elasticity of demand is −0.6, then a ________ increase in price leads to a ________
in quantity demanded.
a. 10 percent; 6 percent increase d. 1 percent; 6 percent decrease
b. 10 percent; 6 percent decrease e. 6 percent; 1 percent decrease
c. 6 percent; 6 percent increase
29. Which of the following statements are true about demand and the price elasticity of demand?
a. When the demand curve has a negative slope, the price elasticity of demand is infinite.
b. When the demand curve has a negative slope, the price elasticity of demand is zero.
c. When the demand curve has a negative slope, the price elasticity of demand is positive.
d. When the demand curve has a negative slope, the price elasticity of demand is negative.
e. When the demand curve has a negative slope, the price elasticity of demand is positive.
30. Suppose that the price elasticity of demand is −0.80 for aspirin. We could then say that the demand
for aspirin is
a. elastic.
b. inelastic.
c. unitary elastic.
d. infinitely elastic.
e. unable to be determined with the provided information.
31. When the demand curve is perfectly horizontal the demand curve has
a. zero elasticity. d. a small, but nonzero, elasticity.
b. a large, but not infinite, elasticity. e. negative elasticity.
c. perfect elasticity.
32. When the demand curve is vertical
a. the price elasticity of demand is negative.
b. the price elasticity of demand is positive.
c. the demand for the good is perfectly elastic.
d. the price elasticity of demand is equal to zero.
e. the price elasticity of demand is equal to −1.
33. When the price elasticity of demand is elastic, a consumer is
a. completely unresponsive to a change in price.
b. relatively unresponsive to a change in price.
c. unaffected by a change in price.
d. relatively responsive to a change in price.
e. completely responsive to a change in price.
34. Demand is almost always more price elastic in the long run because
a. people’s preferences change.
b. newer versions of a good or service replace older ones.
c. production of the good or service stops.
d. more options become available and people can make different choices.
e. government regulations increase.
35. To keep the percentage change in quantity demanded equally proportional to the percentage
change in price when the prices rise by 5 percent, a consumer would need to ________ quantity
demanded by ________.
a. increase; 5 percent d. decrease; 10 percent
b. decrease; 5 percent e. increase; 2 percent
c. increase; 10 percent
36. If a business finds that demand for its good is very price elastic, it knows that
a. price is very important.
b. price is unimportant.
c. price is unrelated.
d. the effect of price is less important than the impact of the quantity consumers buy.
e. the quantity consumers buy is unimportant.
37. When quantity demanded and price increase by 10 percent, you know that price and quantity are
________ to the consumer.
a. equally important d. relatively important
b. everything e. relatively unimportant
c. nothing
38. Kenji tells the manager at Moo’s Ice Cream that he won’t buy any ice cream cones costing more
than $2, but he will buy a limitless number at any price less than $2. His price elasticity of demand
for ice cream cones is
a. perfectly inelastic. d. elastic.
b. inelastic. e. perfectly elastic.
c. unitary elastic.
39. “No matter the price, I will always buy five gallons of ice cream a week. I love ice cream!” This
statement reflects a price elasticity of demand that is
a. perfectly elastic. d. inelastic.
b. elastic. e. perfectly inelastic.
c. unitary.
40. The Sunny Softball league found that when it changed its ticket prices from $10 to $5, there was a
more than proportional but not infinite increase in attendance. The price elasticity of demand is
a. perfectly inelastic. d. perfectly elastic.
b. inelastic. e. unitary elastic.
c. elastic.
41. Sellers of bottled water find that whether the price falls or rises, the quantity bought by consumers
remains unchanged every week. The price elasticity of demand for bottled water is
a. inelastic. d. perfectly elastic.
b. elastic. e. unitary elastic.
c. perfectly inelastic.
42. There was a more than proportional decrease in quantity demanded for cupcakes when the local
baker raised the price by 20 percent. The price elasticity of demand for cupcakes is
a. inelastic. d. perfectly elastic.
b. elastic. e. unitary elastic.
c. perfectly inelastic.
43. When would oil producers see the largest percentage decline in the quantity demanded for oil due
to an increase in the price of oil today?
a. tomorrow d. in 8 years
b. in 6 months e. in 15 years
c. in 2 years
44. The local bakery calculates the price elasticity of demand for its cinnamon rolls to be −1.25. This
tells the owners that demand is ________ and price is ________ to the buyer.
a. inelastic; less important than the quantity
b. elastic; more important than the quantity
c. unitary elastic; on the same level as quantity
d. perfectly inelastic; everything
e. perfectly elastic; meaningless
45. Assume that the market for pencils is in equilibrium and that demand is very price elastic. The
popularity of digital tablets and electronic pens increases and demand for pencils declines. The
equilibrium change in quantity demanded is
a. zero. d. relatively large.
b. relatively small. e. infinite.
c. proportional to the shift in demand.
46. Lee says that he will always spend $20 a week on lattes. Lee’s demand for lattes is price
a. inelastic. d. perfectly elastic.
b. elastic. e. unitary elastic.
c. perfectly inelastic.
47. Cell phone companies found that when they raised the price of connecting to wireless hot spots,
demand decreased more than proportionally among casual users but decreased less than
proportionally among businesspeople. This is because wireless connectivity is a(n) ________ good
for casual users but a(n) ________ good for businesspeople.
a. elastic; inelastic d. inelastic; elastic
b. luxury; necessity e. inferior; normal
c. normal; inferior
48. Which of these graphs represents relatively price elastic demand for a good?
a. Graph A d. Graph D
b. Graph B e. Graph E
c. Graph C
49. Which of these graphs represents perfectly price inelastic demand for a good?
a. Graph A d. Graph D
b. Graph B e. Graph E
c. Graph C
50. Which of these graphs most likely depicts a price elasticity of demand of −5?
a. Graph A d. Graph D
b. Graph B e. Graph E
c. Graph C
51. Which of these graphs most likely depicts a price elasticity of demand of −0.2?
a. Graph A d. Graph D
b. Graph B e. Graph E
c. Graph C
52. Which graph most likely shows the price elasticity of demand for the following situation: Lin’s
Boots can sell out its entire stock of shoe polish at $2.50 but can sell none if it raises the price to
$2.55?
a. A d. D
b. B e. E
c. C
53. From the accompanying table, we can see that the demand curve for ice skates by hockey players
will be ________ the demand curve for recreational skaters.
Price of Ice Skates Quantity Demanded
(hockey players) Quantity Demanded (recreational skaters)
$10 95 70
$20 85 60
$40 75 45
$50 65 25
$60 60 5
a. steeper than d. the same as
b. flatter than e. the inverse of
c. unrelated to
54. In a typical demand curve, the price elastic portion of demand is found in the ________ region and
the price inelastic portion of demand is found in the ________ region of the graph.
a. middle; lower d. middle; middle
b. lower; upper e. None of these choices are correct.
c. upper; lower
55. As we move left along the demand curve, the price elasticity of demand
a. becomes more inelastic. d. becomes infinite.
b. becomes more elastic. e. moves closer to zero.
c. does not change.
56. As we move right along a demand curve, the price elasticity of demand
a. becomes more inelastic. d. becomes infinite.
b. becomes more elastic. e. moves closer to zero.
c. does not change.
57. When the price of softballs is high, a ________ in price will raise total revenue. When the price is
low, the seller should ________ the price to increase total revenue.
a. decrease; raise d. rise; decrease
b. rise; raise e. decrease; not change
c. decrease; decrease
58. At higher prices, the price elasticity of demand is likely to be ________, whereas it is likely to be
________ at lower prices.
a. perfectly elastic; perfectly inelastic
b. elastic; inelastic
c. inelastic; elastic
d. perfectly inelastic; perfectly elastic
e. unitary elastic; elastic
59. When the total revenue and price both move in the same direction (are directly related), demand is
a. elastic. d. horizontal.
b. inelastic. e. vertical.
c. unitary elastic.
60. When the total revenue is unchanged despite the change in price, demand is
a. elastic. d. horizontal.
b. inelastic. e. vertical.
c. unitary elastic.
61. When can a firm lower prices and still increase revenue?
a. when the elasticity of demand is equal to unity
b. when the demand curve is horizontal
c. when the demand curve is vertical
d. when the demand is inelastic
e. when the demand is elastic
62. How can a firm increase total revenue?
a. when demand is inelastic and the price decreases
b. when demand is inelastic and the price increases
c. when demand is elastic and the price increases
d. when demand is unitary elastic and the price decreases
e. when demand is unitary elastic and the price increases
63. How can a firm increase total revenue?
a. when demand is elastic and price decreases
b. when demand is elastic and price increases
c. when demand is unitary elastic and price increases
d. when demand is unitary elastic and price decreases
e. when demand is inelastic and price decreases
64. When the price elasticity of demand is − 0.66, a decrease in price will
a. lead to no changes in total revenue. d. decrease the quantity.
b. increase total revenue. e. lead to no changes in quantity.
c. reduce total revenue.
65. When Kelsey decreases her price of lipstick from $7 to $5, she finds that her sales increase from 6
to 7. She faces ________ demand for her product, and this price change will ________ her total
revenue.
a. elastic; raise d. perfectly elastic; raise
b. inelastic; lower e. perfectly inelastic; lower
c. unitary elastic; not change
66. Firms are indifferent to changing prices when the price elasticity of demand is
a. inelastic. d. unitary elastic.
b. perfectly elastic. e. perfectly inelastic.
c. elastic.
67. For which of the following products should sellers raise the price in order to increase total revenue
from college students?
a. blue hooded sweatshirts d. textbooks
b. Gatorade e. spaghetti sauce
c. concert tickets
68. A 15 percent increase in the price of cookies results in a 9 percent decrease in the quantity of
cookies sold. The revenue received by cookie suppliers will ________ because the price elasticity
of demand for cookies is ________.
a. decrease; inelastic d. not change; unitary elastic
b. increase; elastic e. increase; inelastic
c. decrease; elastic
69. The city of Huntsville is known for its wide variety of ice cream shops. What will happen if
Nicola’s Ice Cream Castle raises the price of its shakes?
a. Demand will decrease by a greater proportion than the price.
b. Demand will increase by a greater proportion than the price.
c. The quantity demanded will decrease by a greater proportion than the price.
d. The quantity demanded will increase by a greater proportion than the price.
e. Demand will not change.
70. The demand for ice cream sandwiches is
a. inelastic. d. perfectly elastic.
b. elastic. e. unitary elastic.
c. perfectly inelastic.
71. The owners raised the price because they believed that the demand for ice cream sandwiches is
a. inelastic. d. perfectly elastic.
b. elastic. e. unitary elastic.
c. relatively price sensitive.
72. A local merchant raises the price of his good and finds that his total revenues increase. The
demand for this good is
a. inelastic. d. perfectly elastic.
b. elastic. e. unitary elastic.
c. relatively price sensitive.
73. Pepsi vendors who raise their price at professional sporting events increase total revenue because
the price elasticity of demand is ________. When they raise their prices at gas stations, they
decrease total revenue because the price elasticity of demand is ________.
a. elastic; inelastic d. inelastic; elastic
b. unitary elastic; elastic e. elastic; unitary elastic
c. elastic; elastic
74. When Heavenly Cookies prices its sugar cookies at $1.00, it sells 75 cookies. It lowers the price to
$0.50 and sells 200 cookies. Its total revenue ________ because the price elasticity of demand for
sugar cookies is ________.
a. rose; elastic d. fell; inelastic
b. rose; inelastic e. stayed the same; unitary elastic
c. fell; elastic
75. The local National Hockey League (NHL) team decides to lower its ticket prices in order to attract
more fans. It is hoping that the
a. price elasticity of demand is perfectly inelastic.
b. price decrease matters more than the quantity increase to total revenue.
c. quantity increase matters more than the price decrease to total revenue.
d. price elasticity of demand is unitary elastic.
e. price elasticity of demand is perfectly elastic.
76. While there are many pizza places in Kutztown, Pappy’s Pizza is known for its distinctive
deep-dish pizza with an almost pie-like crust, whereas Momma’s Pizza is comparable to many
other restaurants. Pappy’s is likely to find that it can ________ prices to increase total revenue, and
Momma’s must ________ prices to increase total revenue.
a. raise; lower d. lower; lower
b. lower; raise e. raise; not change
c. raise; raise
77. Winged Treasures is a specialty store that sells butterfly ornaments. The owner wants to increase
her total revenue and knows that the price elasticity of demand for her product is −0.4. What
should she do to her price?
a. lower it by a relatively large amount
b. leave it unchanged and use another way to increase sales
c. decrease it to zero
d. raise it by any amount
e. lower it by a relatively small amount
78. Refer to the accompanying table. The price elasticity of demand of erasers is ________ when the
price is lowered from $1.50 to $1.00. Sellers of erasers will ________ their total revenue from this
price change.
Price of Erasers Quantity Demanded
of Erasers Quantity Demanded of Pencils
$0.50 10 12
$1.00 8 11
$1.50 7 10
$2.00 6 9
$2.50 5 8
a. perfectly elastic; not change d. inelastic; lower
b. elastic; raise e. inelastic; raise
c. elastic; lower
79. Income elasticity refers to
a. percentage change in quantity demanded divided by the percentage change in price.
b. movement down along a demand curve.
c. movement up along a demand curve.
d. horizontal shift of a demand curve.
e. vertical shift of a demand curve.
80. Income elasticity of demand is defined as
a. the change in price divided by change in income.
b. the change in demand divided by the change in income.
c. the change in demand divided by change in income.
d. the percentage change in demand divided by percentage change in income.
e. the percentage change in demand divided by percentage change in price.
81. The responsiveness of demand to changes in income while holding the good’s relative price
constant is
a. slope of the demand curve. d. price elasticity of demand.
b. price elasticity of supply. e. income elasticity of demand.
c. cross-price elasticity.
82. Super Economy Brand products have an income elasticity of −1.4. Thus, these are ________
goods.
a. necessity d. normal
b. inferior e. complementary
c. luxury
83. The income elasticity of demand for a good measures the responsiveness of ________ to a change
in ________.
a. quantity demanded; price of a related good
b. quantity demanded; income
c. demand; price of good
d. quantity demanded; price of a good
e. income; quantity demanded
84. Income elasticity of demand for professional haircuts is found to be 1.7. This service is a
a. normal good and necessity good.
b. luxury good but not a normal good.
c. necessity good but not a normal good.
d. substitute good.
e. normal good and a luxury good.
85. If the income elasticity of demand is 1.2, the good will be a(n) ________ good.
a. complement d. inferior
b. substitute e. luxury
c. necessity
86. If the income elasticity of demand is 0.5, the good will be a(n) ________ good.
a. complement d. inferior
b. substitute e. luxury
c. necessity
87. If the income elasticity of demand is −3, the good will be a(n) ________ good.
a. complement d. inferior
b. substitute e. luxury
c. necessity
88. When incomes fall by 20 percent, quantity demanded of specialty baked goods falls by 50 percent.
Specialty baked goods are
a. inferior goods.
b. necessities.
c. substitutes for mass-produced bread.
d. luxuries.
e. complements to butter.
89. Used car dealers find that their sales rise in a recession. We can be certain that consumers view
used cars as
a. necessities. d. substitutes.
b. normal goods. e. inferior.
c. luxuries.
90. If the income elasticity of demand for laptops is 3.5, you know that laptops are a(n) ________
good.
a. substitute d. necessity
b. inferior e. complement
c. luxury
91. A shopping mall owner is given a list of income elasticity of demand values. Which one represents
a necessity?
a. − 5 d. 5
b. − 0.5 e. 0.5
c. 0
92. A firm knows that Seneca’s income elasticity of demand for hair ties is 5; for Janelle, it is 0.2. A
firm can reason that a hair tie is a(n) ________ good for Seneca while it is a(n) ________ good for
Janelle.
a. normal; inferior d. inferior; normal
b. complement; substitute e. luxury; necessity
c. necessity; luxury
93. When her income falls from $50,000 to $20,000, Arianna increases her monthly purchase of
hamburger from 20 pounds to 35 pounds. From the midpoint method, Arianna’s income elasticity
of demand for hamburgers is
a. −1.57. d. − 0.85.
b. − 0.63. e. 1.57.
c. 0.54.
94. Shawna wins the lottery and her income increases by 60 percent. She used to buy 10 pints of
cottage cheese per month and now she buys 12 pints. Her income elasticity of demand for cottage
cheese is ________, making it a(n) ________ good.
a. 3; luxury d. 0.28; inferior
b. 3.59; normal e. − 0.33; inferior
c. 0.33; necessity
95. Howard buys 5 suits a year when he earns $70,000. When his income increases to $200,000, he
buys 15 suits a year. From the midpoint method, his income elasticity of demand for suits is
a. 1.04. d. −0.96.
b. 0.96. e. 0.08.
c. −1.04.
96. Refer to the information in the accompanying table. Without any calculations, we know that sushi
is a(n)
Price
(per roll) Quantity Demanded
(income = $10,000/year) Quantity Demanded
(income = $30,000/year)
$1 5 9
$2 4 8
$3 3 7
$4 2 6
$5 1 5
a. necessity. d. inferior good.
b. substitute for fish sticks. e. complement to sake.
c. normal good.
97. If the income elasticity of demand for good smartphone apps is 5 and the percentage change in
income is 10 percent, what is the percentage change in the quantity consumed?
a. − 0.5 percent d. 0.5 percent
b. −5 percent e. 2 percent
c. 50 percent
98. If the income elasticity of demand for noodles is −2 and the percentage change in the quantity
consumed is 5 percent, what is the percentage change in income?
a. 2.5 percent d. −10 percent
b. 10 percent e. −0.4 percent
c. −2.5 percent
99. If the percentage change in the quantity consumed of pizza is 8 percent and the percentage change
in income is 2 percent, what is the income elasticity of demand for pizza?
a. − 0.25 d. − 4
b. 4 e. −1
c. 0.25
100. When Ruben starts working at his first full-time job out of college with a $60,000 salary, he is
likely to buy more ________ and less ________.
a. sushi; canned tuna
b. ramen noodles; steak
c. BMWs; Kias
d. computer hardware; computer software
e. hamburger; salmon
101. When Noelle received a promotion at work, her income rose by 50 percent. The income elasticity
of demand for steak was found to be 1.5. For her, steak is a(n)
a. inferior good. d. substitute for chicken.
b. necessity. e. luxury.
c. complement to potatoes.
102. What good is most likely to have a negative income elasticity of demand?
a. steak d. pizza
b. caviar e. instant noodles
c. designer clothing
103. What good is most likely to have an income elasticity of demand equal to 0.3?
a. medication d. laptop
b. takeout dinner e. a download on iTunes
c. used clothing
104. What good is most likely to have an income elasticity of demand equal to 8?
a. a doctor’s visit d. a five-star hotel
b. toilet paper e. college coursework
c. used clothing
105. When her income increases from $10,000 to $20,000, as shown in the accompanying table, Juanita
increases the quantity demanded from 3 to 7 rolls at a price of $3. From the midpoint method,
income elasticity of demand for sushi is
Price
(per roll) Quantity Demanded
(income = $10,000/year) Quantity Demanded