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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 Spring '10
 xx
 Supply And Demand, $40, $300, $32

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