Choose the correct answer for each question.

1. Suppose we find that the cross-price elasticity of demand for two products is a negative number. We know that

   1.   ?    the two goods are complements
   2.   ?    the two goods are normal goods
   3.   ?    the two goods are substitutes
   4.   ?    the two goods are inferior goods

2. If the cross elasticity of demand between two products is +3.5, then

   1.   ?    the two products are complements
   2.   ?    the two products are substitutes
   3.   ?    one of the products is expensive and one is relatively inexpensive
   4.   ?    one product is a normal good and the other is an inferior good

3. The price of Toyota cars falls by 8% and in the following time period, the demand for Nissan cars declines by 2%. The cross price elasticity of demand for Nissan cars is

   1.   ?    +2.0
   2.   ?    +0.25
   3.   ?    +0.5
   4.   ?    -0.25

4. The price of fresh pasta increases by 30% and as a result the demand for red wine falls by 3%, we can conclude from this information that

   1.   ?    the two goods are close substitutes
   2.   ?    the two goods are weak substitutes
   3.   ?    the two goods are close complements
   4.   ?    the two goods are weak complements

5. The table below shows the estimated price and cross price elasticities of demand for beer, wine and spirits
   
   From the table we can deduce that

   1.   ?    The demand for beer is price elastic
   2.   ?    The demand for wine is price inelastic
   3.   ?    Beer and Wine are close substitutes
   4.   ?    Wine and Spirits are weak complements

6. Suppose that the demand for ink jet printers increases by 15% following a 30% decline in the market price of home computers, we can conclude from this information that

   1.   ?    CPed is negative and the goods are complements
   2.   ?    CPed is negative and the goods are substitutes
   3.   ?    CPed is positive and the goods are complements
   4.   ?    There is no relationship between the two goods