For which of the following goods is the income elasticity of demand likely lowest?

• water

• sapphire pendant necklaces

• filet mignon steaks

• fresh fruit

Suppose Phil and Miss Kay are the only consumers in the market. If the price is $12, then the market quantity demanded is

• 6

• 4

• 0

• 2

If a decrease in income increases the demand for a good, then the good is a(n)

• substitute good.

• normal good.

• inferior good.

• complementary good.

Which of the following is the best example of a perfectly competitive market?

• garbage collection.

• tennis racquets.

• pizza.

• wheat.

All else equal, the approach of Thanksgiving would cause a move from

• Da to Db.

• Db to Da

• x to y

• y to x

If the price elasticity of demand for a good is 0.3, then a 20 percent decrease in price results in a

• 0.6 percent increase in the quantity demanded.

• 0.015 percent increase in the quantity demanded.

• 66 percent increase in the quantity demanded.

• 6 percent increase in the quantity demanded.

A city wants to raise revenues to build a new municipal swimming pool next year. The mayor suggests that the city raise the price of admission to the current municipal pools this year to raise revenues. The city manager suggests that the city lower the price of admission to raise revenues. Who is correct?

• The answer depends on the costs of construction of the new municipal swimming pool.

• the city manager

• The answer depends on the price elasticity of demand.

• the mayor

What will happen to the equilibrium price of new textbooks if more students attend college and paper becomes cheaper?

• The price change will be ambiguous.

• Price will rise.

• Price will stay exactly the same.

• Price will fall.

If the cross-price elasticity of demand for two goods is 1.25, then

• the two goods are substitutes.

• the two goods are luxuries.

• demand for one of the goods conforms to the law of demand, but the demand for the other good violates the law of demand.

• one of the goods is normal and the other good is inferior.

For a particular good, an 8 percent increase in price causes a 4 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

• The relevant time horizon is long.

• The good is a luxury.

• There are many close substitutes for this good.

• The market for the good is broadly defined.