In September 2006, the Food and Drug Administration recommended that Americans a
ID: 1093632 • Letter: I
Question
In September 2006, the Food and Drug Administration recommended that Americans avoid eating bagged
raw spinach in the wake of an outbreak of E. coli bacteria. Following this recommendation, the food industry
looked at alternatives and many turned to arugula. One Chicago distributor claimed, "The sale of the stuff has
gone through the roof." Based on this information,
arugula is a normal good while raw spinach is an inferior good.
the cross-price elasticity between arugula and spinach is negative.
C.the cross-price elasticity between arugula and spinach is positive
the price elasticity of arugula is positive while the price elasticity of spinach falls to zero.
If the cross-price elasticity of demand for computers and software is negative, this means the two goods are
substitutes.
complements.
inferior.
normal.
Suppose a frost destroys the tomato crop in California but farmers see an increase in their revenues.
Which of the following best explains this?
The decrease in supply led to huge price increases.
Tomatoes are necessities.
The demand for tomatoes is price inelastic.
The cross-price elasticity between tomatoes and most other substitute vegetables is very low.
A.arugula is a normal good while raw spinach is an inferior good.
B.the cross-price elasticity between arugula and spinach is negative.
C.the cross-price elasticity between arugula and spinach is positive
D.the price elasticity of arugula is positive while the price elasticity of spinach falls to zero.
Explanation / Answer
In September 2006, the Food and Drug Administration recommended that Americans avoid eating bagged
raw spinach in the wake of an outbreak of E. coli bacteria. Following this recommendation, the food industry
looked at alternatives and many turned to arugula. One Chicago distributor claimed, "The sale of the stuff has
gone through the roof." Based on this information,
arugula is a normal good while raw spinach is an inferior good.
the cross-price elasticity between arugula and spinach is negative.
C.the cross-price elasticity between arugula and spinach is positive
the price elasticity of arugula is positive while the price elasticity of spinach falls to zero.
If the cross-price elasticity of demand for computers and software is negative, this means the two goods are
substitutes.
complements
R: A good with a negative cross elasticity of demand, meaning the good's demand is increased when the price of another good is decreased..
inferior.
normal.
Suppose a frost destroys the tomato crop in California but farmers see an increase in their revenues.
Which of the following best explains this?
The decrease in supply led to huge price increases.
Tomatoes are necessities.
The demand for tomatoes is price inelastic.
The cross-price elasticity between tomatoes and most other substitute vegetables is very low.
A.arugula is a normal good while raw spinach is an inferior good.
B.the cross-price elasticity between arugula and spinach is negative.
C.the cross-price elasticity between arugula and spinach is positive
D.the price elasticity of arugula is positive while the price elasticity of spinach falls to zero.
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