14 questions
A product is likely to have a price elasticity of demand that exceeds 1 when:
Its price falls
It is a necessity
It has close substitutes
Consumers are not very responsive to changes in price
If the income elasticity of demand for good X is negative and the cross-price elasticity of demand between good X and good Y is negative, which of the following must be true of good X?
X is an inferior good and is a complement to Y.
X is an inferior good and is a substitute for Y.
X is a normal good and is a complement to Y.
X is a normal good and is a substitute for Y.
Assume the income elasticity of demand for good Z equals −5.0. Which of the following is true?
An increase in income will lead to a decrease in demand.
Good Z is a normal good.
An increase in income will lead to an increase in demand.
Good Z must have an inelastic demand.