Micro Economics Quiz?

Question

Question 1 (1 point)Save Question 1Save

When the price of chicken is $2.00 per pound, consumers buy 50 pounds of hamburger. When the price of chicken rises to $3.00 per pound, 60 pounds of hamburger are purchased. The cross price elasticity of demand between chicken and hamburger is approximately equal to

+0.04.

+0.05.

+0.45.

+0.10.

Question 2 (1 point)Save Question 2Save

If an individual's income rises 40 percent and his clothing purchases increase 50 percent in response, the income elasticity for clothing by the individual is

0.8.

1.25.

-0.8.

1.0.

Question 3 (1 point)Save Question 3Save

If the price elasticity of demand for apples is greater than 1, an increase in apple prices will

either raise or lower total revenue, but it is impossible to determine which.

not affect total revenue.

lower total revenue.

raise total revenue.

Answer 1

Question 1

When the price of chicken is $2.00 per pound, consumers buy 50 pounds of hamburger. When the price of chicken rises to $3.00 per pound, 60 pounds of hamburger are purchased. The cross price elasticity of demand between chicken and hamburger is approximately equal to

+0.45.(the correct figure is 0.4 and o.45 is the closest: 50% increase in price of chicken leads to 20% increase in demand for hamburgers and 20%/50%= 0.4

Question 2

If an individual's income rises 40 percent and his clothing purchases increase 50 percent in response, the income elasticity for clothing by the individual is

1.25. ( 50%/40%= 50/40= 1.25)

Question 3

If the price elasticity of demand for apples is greater than 1, an increase in apple prices will

lower total revenue. ( elasticity greater than 1 means that an increase in price will lead to proportionately larger fall in demand or number of units sold)