Question : 27) If a 5 percent increase in income leads to : 1387545

27) If a 5 percent increase in income leads to a 10 percent increase in quantity demanded for airline travel, then airline travel is

A) a necessity.

B) a substitute for another good.

C) a luxury.

D) an inferior good.

28) If a 6 percent increase in income leads to a 4 percent increase in quantity demanded for audio books, the income elasticity of demand is

A) -0.67.

B) 0.67.

C) 1.5.

D) 2.

29) If a 5 percent increase in income leads to a 10 percent decrease in quantity demanded for a product, this product is

A) an income elastic good.

B) an inferior good.

C) a necessity.

D) a luxury good.

30) If the quantity demanded for a good rises as income rises, then the income elasticity of demand for this good is ________ than 0, and the good is ________ good.

A) greater; an inferior

B) less; a normal

C) less; an inferior

D) greater; a normal

31) Demand for a luxury item, such as a yacht, is likely to be

A) both income and price inelastic.

B) both income elastic and price elastic.

C) income elastic and price inelastic.

D) income inelastic and price elastic.

Figure 6-9

32) Refer to Figure 6-9.  The data in the diagram indicates that DVDs are

A) luxury goods.

B) inelastic goods.

C) necessities.

D) both luxury goods and inelastic goods.

E) both necessities and inelastic goods.

33) Suppose you have surveyed a few industries and obtained information about the income elasticity of demand for their products. If you expect that the economy is headed for a long recession, you would advise people to look for jobs in an industry with

A) a high positive income elasticity coefficient such as 5.

B) a low positive income elasticity coefficient such as 0.8.

C) a “high” negative income elasticity coefficient such as -4.

D) a “low” negative income elasticity coefficient such as -0.2.

34) Last year, Joan bought 50 pounds of hamburger when her household income was $40,000. This year, her household income was only $30,000 and Joan bought 60 pounds of hamburger. Holding everything else constant, Joan’s income elasticity of demand for hamburger is

A) positive, so Joan considers hamburger to be an inferior good.

B) negative, so Joan considers hamburger to be an inferior good.

C) positive, so Joan considers hamburger to be a normal good and a necessity.

D) negative, so Joan considers hamburger to be a normal good.

35) Which of the following items is likely to have the highest income elasticity of demand?

A) a luxury cruise to several European countries

B) water

C) breakfast cereal

D) a hamburger

36) Suppose you are considering buying stock in the stock market, and your objective is to maximize your net worth. Furthermore, your study of the market reveals that the economy will be slowing down over the next several months. Under these conditions, it would be best to purchase stock in companies that produce

A) normal goods.

B) luxury goods.

C) inferior goods.

D) price elastic goods.