Question

1. Suppose Clyde always eats ice cream and chocolate syrup together. If the price of syrup increases by 10 percent, and the cross elasticity of demand is -2, the demand for ice cream: A) decreases by 5 percent B) decreases by 20 percent C) Increases by 20 Percent D) Increases by 5 percent

2. Which of the following is NOT a determinant of a good's price elasticity of demand? A) The share of good in the consumer's total budget B)The slope of the demand curve C)Whether the good is a luxury or necessity D)The passage of time

3. For electricity, natural gas, or other forms of energy, it is very likely that the price elasticity of demand a) is infinite b) will decrease in magnitude as more time passes after a price change c)will increase in magnitude as more time passes after a price change D) is zero Thanks for any guidance on these!

Answer 1

1.Ec=%change in quantity of good X/% change in price of good y

X is ice cream and Y is chocolate syrup.Ec is cross price elasticity.

%change in demand for ice cream=-2*10=-20%

Answer-B

2.The slope of demand curve is not a determinant of elasticity.Elasticity determines the slope of demand curve.

Answer-B

3.Electricity,natural gas etc are necessary goods and have inelastic demand.However the elasticity of demand increases with time.

Answer-C