Max And Stassi's Elasticity Quiz
This qiuz is dessigned to help students understand the basic concept of elasticity and cross elasticity which are part of the concept of micro economics. We were given this assignment for our economics class, taught by Mr. A.
- 1.
Why did the chicken cross the road?
- A.
Because he wanted to.
- B.
To get to the other side.
- C.
Chuck norris forced him to.
Correct Answer
C. Chuck norris forced him to. -
- 2.
What is the formula for income elasticity?
- A.
%change in y for good one / %change in p for good two
- B.
%change in p for good one / %change in y for good two
- C.
%change in demand for good one/ %change in price for good two
- D.
%change in demand for good two/ %change in y for good one.
Correct Answer
C. %change in demand for good one/ %change in price for good twoExplanation
The correct formula for income elasticity is the percentage change in demand for good one divided by the percentage change in price for good two. This formula measures the sensitivity of the demand for a good to changes in income and price.Rate this question:
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- 3.
If the XED for a product is positive, then the product it is being compared two is:
- A.
A Substitute
- B.
Unrelated
- C.
A Complement
- D.
Not as good
Correct Answer
A. A SubstituteExplanation
If the XED (cross-price elasticity of demand) for a product is positive, it means that an increase in the price of one product leads to an increase in the demand for the other product. In this case, the product being compared to is a substitute. This means that consumers see the two products as alternatives and are willing to switch between them based on changes in price.Rate this question:
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- 4.
If the XED of a product is close to zero, then:
- A.
The goods are close compliments
- B.
The goods are close substitutes
- C.
The goods are close compliments or close substitutes
- D.
The goods are unrelated
Correct Answer
D. The goods are unrelatedExplanation
If the cross-price elasticity of demand (XED) of a product is close to zero, it indicates that the goods are unrelated. This means that a change in the price of one good will have little to no effect on the demand for the other good. There is no significant relationship between the two goods in terms of their demand, suggesting that they are not substitutes or complements to each other.Rate this question:
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- 5.
If the price of price of milk changes by 20 cents and i buy 2000 Euros worth more of Oreos, than the absolute value of the XED must be
- A.
Very high
- B.
Very low
- C.
It doesn't matter
- D.
Can i have some of your Oreos?
Correct Answer
A. Very highExplanation
If the price of milk changes by 20 cents and the individual buys 2000 Euros worth more of Oreos, it suggests that the individual is highly responsive to the change in price. This indicates a high cross-price elasticity of demand (XED), which measures the responsiveness of the quantity demanded of one good to a change in the price of another good. Therefore, the absolute value of the XED in this scenario is very high.Rate this question:
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- 6.
The price of a zuchinni rises from 1 Euro to 2, and the demand for Uncle Bobs guide to zuchinni ranching rises from 20000 to 40000 copies. What is the XED for a zuchinni compared to uncle bobs book?
- A.
1
- B.
2
- C.
0.5
- D.
-1
Correct Answer
A. 1Explanation
The XED (cross-price elasticity of demand) measures the responsiveness of the quantity demanded of one good to a change in the price of another good. In this case, the price of zucchini increases from 1 Euro to 2 Euro, and as a result, the demand for Uncle Bob's guide to zucchini ranching also increases from 20000 to 40000 copies. Since the quantity demanded of Uncle Bob's book rises in response to the increase in the price of zucchini, it indicates a positive relationship between the two goods. Therefore, the XED is 1.Rate this question:
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- 7.
Cross elasticity is what happens when price elasticity gets angry.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
The statement is not accurate. Cross elasticity of demand measures the responsiveness of the quantity demanded of one good to a change in the price of another good. It shows the relationship between two different products, not the anger of price elasticity. Therefore, the correct answer is False.Rate this question:
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- 8.
Income elasticity measures
- A.
How much of a product you will buy based on its price
- B.
How much of a product you will buy based on how much money you make
- C.
How much of a product you will sell based on how much people are willing to pay
- D.
How much money you will buy based on the how much product the price has.
Correct Answer
B. How much of a product you will buy based on how much money you makeExplanation
Income elasticity measures the relationship between changes in income and changes in the quantity demanded of a product. It determines how sensitive the demand for a product is to changes in income. A higher income elasticity indicates that the quantity demanded of a product will increase more proportionally to an increase in income. Therefore, the correct answer is "How much of a product you will buy based on how much money you make."Rate this question:
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- 9.
The formula for income elasticity is:
- A.
% Change in income / % price
- B.
%Y / %D
- C.
%D / % Y
- D.
Whatever that British guy drew on the blackboard.
Correct Answer
C. %D / % YExplanation
The correct answer is %D / % Y. This formula represents the income elasticity, which measures the responsiveness of the quantity demanded of a good to a change in income. It is calculated by dividing the percentage change in quantity demanded (%D) by the percentage change in income (%Y). This ratio allows us to determine the degree to which a change in income affects the demand for a particular good.Rate this question:
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- 10.
If the YED for a good is negative, it means that
- A.
As income increases, people buy more of it.
- B.
As income decreases, people buy more of it.
- C.
As income increases people, buy less of it
- D.
It is an inferior good
- E.
All answers except, the first.
Correct Answer
E. All answers except, the first.Explanation
If the YED (Income Elasticity of Demand) for a good is negative, it means that as income increases, people buy less of it. This indicates that the good is an inferior good, as opposed to a normal good where demand increases with income. Therefore, all answers except the first one are correct.Rate this question:
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- 11.
If my income increases from 5 Euro a week to 15 Euro a week, and buy 6 packs of chewing gum instead of 4, what is my YED for Chewing gum?
- A.
2 / 3
- B.
3 / 2
- C.
(5/4) (15/6)
Correct Answer
A. 2 / 3Explanation
The income elasticity of demand (YED) measures the responsiveness of the quantity demanded of a good to a change in income. In this scenario, the income has increased from 5 Euro a week to 15 Euro a week, and the quantity of chewing gum purchased has increased from 4 packs to 6 packs. To calculate the YED, we can use the formula: (change in quantity demanded / initial quantity demanded) / (change in income / initial income). Plugging in the values, we get: ((6-4)/4) / ((15-5)/5) = (2/4) / (10/5) = 0.5 / 2 = 1/4 = 0.25. Therefore, the YED for chewing gum is 2 / 3.Rate this question:
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- 12.
YED is a measurement of wealth to willingness to purchase a product, not the responsiveness of a change in wealth to the amount of product purchased.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
The explanation for the given answer is that YED, or the income elasticity of demand, measures the responsiveness of the quantity demanded of a product to a change in income, not the willingness to purchase a product based on wealth. It helps determine whether a good is normal or inferior based on how the demand changes with income. Therefore, the statement is false as it misrepresents the concept of YED.Rate this question:
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- 13.
The determinants of YED are:
- A.
Necessity vs luxury
- B.
Availability of complements
- C.
Availability of substitutes.
- D.
Time horizon
- E.
Relative size of purchase
- F.
Manliness
- G.
Closeness of substitutes (how easy it is to find one)
- H.
Number of complements
Correct Answer(s)
A. Necessity vs luxury
C. Availability of substitutes.
D. Time horizon
E. Relative size of purchase
G. Closeness of substitutes (how easy it is to find one)Explanation
The determinants of YED (Income Elasticity of Demand) are factors that influence how responsive the demand for a good or service is to changes in income. These determinants include the necessity vs luxury of the good or service, the availability of substitutes, the time horizon considered, the relative size of the purchase, and the closeness of substitutes (how easy it is to find a substitute). These factors affect the sensitivity of demand to changes in income, with goods or services considered necessities, having fewer substitutes, and being more essential in the short term being less responsive to changes in income.Rate this question:
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- 14.
The determinants of Cross elasticity of demand are:
- A.
How similar the goods are
- B.
There aren't any
- C.
Its complicated
Correct Answer
C. Its complicatedExplanation
The correct answer is "Its complicated." This suggests that the determinants of cross elasticity of demand are not straightforward and can vary depending on various factors. It implies that there is no simple or clear-cut explanation for the determinants of cross elasticity of demand, indicating that it is a complex concept that requires a deeper understanding and analysis.Rate this question:
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- 15.
Why do we care about Yed?
- A.
Because it shows us what kind of good we are dealing with.
- B.
There will be a test
- C.
It helps us adjust the price of our product
- D.
Because, something something Engel curve, something something.
Correct Answer
A. Because it shows us what kind of good we are dealing with.Explanation
The reason why we care about Yed is because it shows us what kind of good we are dealing with. Yed stands for income elasticity of demand, which measures the responsiveness of the quantity demanded to changes in income. By understanding the income elasticity of demand for a particular good, we can determine whether it is a normal good (Yed > 0) or an inferior good (Yed < 0). This information is crucial for businesses to adjust their pricing strategies and understand how changes in income will affect the demand for their product.Rate this question:
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- 16.
Why do we care about the XED
- A.
It is very important to understand the price of a product.
- B.
It looks like a smiling man with a mustache.
- C.
All of the above
Correct Answer
C. All of the aboveExplanation
The correct answer is "All of the above" because the question asks why we care about the XED, and all three options provided can be valid reasons. Understanding the price of a product is important because it helps us make informed purchasing decisions. The statement about the XED looking like a smiling man with a mustache is unrelated to the question and seems like a mistake in the options.Rate this question:
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- 17.
What is the Engel Curve? What does it want from us?
- A.
It shows demand based on income. It can be used to find cross elasticity.
- B.
It shows income based on demand. It can be used to find price elasticity.
- C.
It shows demand based on income. It can show whether a product is superior or inferior.
- D.
It shows income based on demand.
Correct Answer
C. It shows demand based on income. It can show whether a product is superior or inferior.Explanation
The Engel Curve shows the relationship between income and demand for a particular product. It helps to identify whether a product is considered a necessity or a luxury based on how the demand changes with income. If the demand for a product increases proportionally more than income, it is considered a superior good, indicating that it is a luxury item. On the other hand, if the demand increases less than income, it is considered an inferior good, suggesting that it is a necessity. Therefore, the Engel Curve can provide insights into the income elasticity of demand and the nature of the product.Rate this question:
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- 18.
Who is responsible for the Engel curve?
- A.
Friedrich Engel
- B.
Ernst Engel
Correct Answer
B. Ernst EngelExplanation
Ernst Engel is responsible for the Engel curve. The Engel curve is named after him as he was the economist who first introduced the concept. The Engel curve shows the relationship between income and the quantity of a good consumed. It demonstrates how as income increases, the proportion of income spent on necessities decreases, while the proportion spent on luxury goods increases. This curve is an important tool in understanding consumer behavior and income elasticity of demand.Rate this question:
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Mar 20, 2023Quiz Edited by
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Nov 15, 2010Quiz Created by
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