Given the typical income elasticity for food, a 10 percent increase in income will lead to
A. An increase in food demand of more than 10 percent.
B. An increase in food demand of less than 10 percent.
C. An increase in food demand of 10 percent.
D. A decrease in food demand of less than 10 percent.
Answer: B
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If the price of a a good increases by 10 percent and the quantity supplied increases by 5 percent, then the elasticity of supply is
A) greater than one and supply is elastic. B) negative and supply is inelastic. C) less than one and supply is elastic. D) less than one and supply is inelastic. E) greater than one and supply is inelastic.
Suppose the market-clearing price of wheat is $2.50 per bushel. What would happen if wheat farmers persuaded the government to set a legally-mandated price support of $3.75 per bushel?
A) The quantity demanded of wheat would fall. B) The quantity supplied of wheat would rise. C) A surplus of wheat would occur. D) All of the above.