303ex2-PQs - ECON 303 Practice Questions for Exam 2 1....

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ECON 303 Practice Questions for Exam 2 1. Suppose, consumer income increases from $300 to $600 per week and, as a result, quantity demanded of good X increases from 1,000 units to 1,400 units per week. . a. What is the income elasticity of demand for good X? ( Answer: 0.5 ) b. If consumer income increases by 10%, what would be the expected change in the quantity demanded of good X? ( Answer: 5% ) c. Based on the income elasticity coefficient calculated in (a), is the good normal or inferior? ( Answer: Normal ) 2. Suppose, consumer income decreases from $400 to $200 per week and, as a result, quantity demanded of good Y increases from 600 units to 800 units per week. . a. What is the income elasticity of demand for good Y? ( Answer: -0.43 ) b. If consumer income decreases by 10%, what would be the expected change in the quantity demanded of good Y? ( Answer: -4.3% ) c. Based on the income elasticity coefficient calculated in (a), is the good normal or inferior? ( Answer: Inferior ) 3. The demand for good X has been estimated by Q d = 12 - 3P x + 4M. Suppose that good X sells at $2 per unit and consumer income, M, is $100. a. What is the income elasticity of demand for good X? ( Answer: 0.99 ) b. If consumer income increases by 10%, what would be the expected change in the quantity demanded of good X? ( Answer: 9.9% ) c. Based on the income elasticity coefficient calculated in (a), is the good normal or inferior? ( Answer: Normal ) 4. The demand for good X has been estimated by Q d = 2,000 - 4P x - 8M. Suppose that good X sells at $1 per unit and consumer income, M, is $200. a. What is the income elasticity of demand for good X? ( Answer: -4.0 ) b. If consumer income increases by 10%, what would be the expected change in the quantity demanded of good X? ( Answer: -40% ) c. Based on the income elasticity coefficient calculated in (a), is the good normal or inferior? ( Answer: Inferior ) 5. Suppose X and Y are the only two goods available for purchase and P
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303ex2-PQs - ECON 303 Practice Questions for Exam 2 1....

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