1. When Fred's income was $100 per week, 10 units of good X were demanded. Now his income is $150 per week and 12 units of good X are demanded. Using the percentage change formula, the income elasticity of demand for good X equals ________.
a. 0.40 b. 0.45 c. 2.20 d. 2.50
2. Which of the following goods is likely to have the highest income elasticity?
a. Can of tuna
b. Hamburger
c. Tomato soup
d. A designer blouse
3. If demand for Rolls Royce automobiles rises in an area where incomes have increased, this tells us that a Rolls Royce is
a. a complementary good.
b. a substitute good.
c. a normal good.
d. an inferior good.
4. If your income rises by 25 percent and, as a result, you buy fewer packages of Ramen Noodles, then Ramen Noodles are a(n)
a. normal good.
b. substitute.
c. complement.
d. inferior good.
5. Which English philosopher set out to develop an arithmetic formula for measuring happiness and along the way invented the util?
a. Adam Smith
b. John Maynard Keynes
c. Milton Friedman
d. Jeremy Bentham
6. If marginal utility is zero,
a. a rational consumer will consume one less unit next time.
b. a rational consumer will consume one more unit.
c. a rational consumer will consume one more unit if the price is zero.
d. a rational consumer will not consume additional units beyond this point.