1. Suppose that the market of cellular phones, an inferior good, is in equilibrium. Then a decrease in consumers' income due to a recession, everything else constant, will:
a. increase the demand for cellular phones and increase the equilibrium price
b. decrease demand for cellular and decrease the equilibrium price
c. decrease demand for cellular phones and increase the equilibrium price
d. increase the demand for cellular phones but decrease the equilibrium price
2. Which of the following alternatives causes only the quantity demanded of cellular phones to change?
a. A decrease in the price of cellular phones
b. A decrease in the income of consumers
c. An increase in the quality of cellular phones
d. An increase in the number of consumers who buy cellular phones
3. Printers and printer ink are complementary goods. If the price of printer ink in the market falls dramatically, all else equal, the demand for printers should
a. first fall then rise
b. decrease
c. stay the same
d. increase
4. Suppose that the income elasticity of cellular phones is +.89. Then cellular phones can be classified as:
a. normal and necessity
b. inferior and inelastic
c. elastic and luxury
d. normal and cyclical
5. The price elasticity of demand for the IPod is equal to -1.5. Assuming all other variables equal, a 10% decrease in price of IPod would:
a. increase IPod sales by 15 percent and increase total revenue
b. increase IPod sales by less than 15 percent and leave total revenues unchanged
c. decrease total revenue by at most 15 percent
d. increase IPod sales by 1.5 percent and increase total revenues 6.
6. The price of the water resistant mascara of WOMEN BUTY Corp. decreased from $10 a unit to $8 a unit and the quantity sold during last month increased by twelve percent. Hence the demand for WOMEN BUTY water resistant mascara is:
a. perfectly inelastic
b. perfectly elastic
c. unit elastic
d. inelastic
7. Suppose that we have the following sales function: QX = -4Px + 2PY + 0.2I + 0.04A Px = $ 200, the Price of good X, Py = $140, the price of good Y, I =2,000, income, A = $15,000 advertizing expenditures. At what price would demand be unit elastic?
a. $160
b. $150
c. $140
d. $130
8. Suppose that we have the following sales function: QX = -4Px + 2PY+ 0.2I + 0.04A Px = $ 200, the Price of good X, Py = $140, the price of good Y, I =2,000, income, A = $15,000 advertising expenditures. If we calculate the income elasticity of demand, given above information, then good X can be:
a. inferior, countercyclical but luxury good
b. normal, cyclical and luxury good
c. inferior, cyclical as well as a necessity good
d. normal, countercyclical and necessity good
9. The demand for Hybrid fuel efficient cars can be characterized by the following point elasticities: price elasticity -4, cross-price elasticity with Smart Cars = +2, and income elasticity is 2.5.
A. According to above mentioned information, hybrid fuel efficient cars are:
B. An increase in the price of Smart cars, assuming all other variables constant, would:
a. increase the number of hybrid cars sold and decrease total revenue of hybrid car sales
b. increase the number of hybrid cars sold and leave revenues of hybrid car sales the same
c. increase the number of hybrid cars sold and increase total revenue of hybrid car sales
d. reduce the number of hybrid cars sold and reduce revenues of hybrid car sales
10. A four percent change in the price of TV Plasmas causes the quantity demand of TV Plasmas to change by two percent. Therefore the price elasticity of demand for TV Plasmas is: 1. -8 2. -2 3. -0.5 4. elastic 12. If demand for a product is inelastic then a price
a. increase would decrease total revenue
b. increase would increase total revenue
c. decrease would increase total revenue
d. increase would leave total revenue unchanged
11. We have the following sales function: QX = -4Px + 2PY + 0.2I + 0.04A, where: Px = $ 200, the Price of good X , Py = $140, the price of good Y, I =2,000, income, A = $15,000 advertizing expenditures. From the above equation we can infer that product X and product Y are
a. inferior goods
b. substitutes
c. unrelated
d. Complements
12. Suppose that we have the following sales function: QX = -4Px + 2PY + 0.2I + 0.04A Px = $ 200, the Price of good X, Py = $140, the price of good Y, I =2,000, income, A = $15,000 advertizing expenditures.
a. The total revenue function (TR) derived from the above equation would be:
b. The marginal revenue function (MR) derived from above sales function would be:
c. Demand for good X could be classified as:
d. The total revenue function (TR) derived from the above equation would be:
e. Given above information expected sales are:
f. Given above information the derived demand function is equal to:
g. The level of sales that would maximize total revenue (TR) would be:
13. Suppose that we have the following sales function: QX = -4Px + 2PY + 0.2I + 0.04A Px = $ 200, the Price of good X, Py = $140, the price of good Y, I =2,000, income, A = $15,000 advertizing expenditures. Which of the following narrative interpretations for the coefficient of income (I) is correct?
a. A one dollar increase in income would increase sales by 0.2 percent
b. A 1% increase in income would decrease sales of X by 0.2 percent
c. A 1% increase in income would increase sales of good X by 2/10 of one percent
d. A $100 increase in income would increase sales by $20
14. The manager of a computer store argues that an increase in the price of computer laptops in his store will increase its sales revenues. The implicit assumption made by this manager is that the demand for laptops is:
15. The income and substitution effect produce changes in the quantity demanded of a good and are the result of changes in:
16. The cross elasticity of demand between FACEBOOK and TWITTER is likely to be:
17. The demand for DVD Player MXZ is unit elastic. A 10 percent increase in the price of this DVD player will:
18. If the cross price elasticity between two goods is -0.5, the two goods are:
19. If the price elasticity of demand for the notebook laptop is -.65. Then the demand for notebooks can be described as: