If the cross-price elasticity of demand between two goods is positive, then
a. consumers are being irrational
b. supply is elastic
c. the goods may have similar uses
d. the goods may go well together in consumption
e. one good must be a necessity
QUESTION 2If an increase in the price of peanut butter causes a decline in the demand for jelly, then
a. the goods are substitutes
b. jelly is an inferior good
c. the goods are complements
d. both goods are inelastic
e. peanut butter is an inferior good
QUESTION 3In order to prove that Coca Cola and 7-Up are substitutes, one should test the __________ and get a __________.
a. price elasticity of demand; number less than negative 1
b. income elasticity; positive number
c. cross-price elasticity; negative number
d. price elasticity of demand; number greater than negative 1
e. cross-price elasticity; positive number
QUESTION 4Computers and software programs are
a. inferior goods
b. complementary goods
c. goods with a cross-price elasticity of demand of 0
d. substitute goods
e. perfectly elastic goods
QUESTION 5If the cross-price elasticity of demand is -3, then
a. the goods are substitutes
b. one good is price inelastic
c. one good is an inferior good
d. one good is a luxury good
e. the goods are complements
QUESTION 6Suppose the cross-price elasticity of demand between quinces and muskmelons is 5 . Which of the following must be true?
a. Quinces are normal goods.
b. Muskmelons are normal goods.
c. If the price of quinces rises by 5, the demand for muskmelons will increase by 1.
d. If the price of muskmelons rises by 5, the demand for quinces will increase by 1.
e. Quinces and muskmelons are substitutes.
QUESTION 7The cross-price elasticity of demand between milk and soft drinks is likely to be
a. negative because the goods are complements
b. positive because the goods are complements
c. negative because the goods are substitutes
d. positive because the goods are substitutes
e. 0 because the goods are not usually consumed by the same person at one time
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