Homework Answers
Q7. a.b e and f
A normal good will be consumed more for a decrease in price
An inferior good will be substituted for decrease in price which
leads to reduced consumption
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QUESTION 7 TE, SE, IE. When the price of good 1 decreases, the following is true...
1. Which of the following claims is true at each point along a price-consumption curve? A)...
1. Which of the following claims is true at each point along a price-consumption curve? A) Utility is maximized but income is not all spent. B) All income is spent, but utility is not maximized. C) Utility is maximized, and all income is spent. D) The level of utility is constant. 2. Consider a graph on which one good Y is on the vertical axis and the only other good X is on the horizontal axis. On this graph the income-consumption curve...
. Draw a concept graph to show the substitution effect (SE), income effect (IE), and total...
. Draw a concept graph to show the substitution effect (SE), income effect (IE), and total effect (TE) of an increase in the price of X on the demand for X with X to be an inferior good and Y to be a normal good
1. The reservation wage likely increases when A. the price of consumption increases. B. the wage...
1. The reservation wage likely increases when A. the price of consumption increases. B. the wage increases. C. the price level (of consumption and wages) increases. D. non-labor income increases. E. one is a discouraged worker. 2. Due to the added worker effect, the labor force participation rate A. increases during a recession. B. decreases during a recession. C. a fairly useless statistic. D. over-counts the number of workers wanting a job. E. over-counts the number of workers with a...
Exercise 1: Decomposing the Total effect of a price change We wume that an individual consumes...
Exercise 1: Decomposing the Total effect of a price change We wume that an individual consumes only two goods, Good 1 and Good 2. 1. We would like to decompose the total effect on quantity consumed of Good 1 and Good 2, following a price decrease for Good 2. Please fill out the following table. Note: Please denote an increase in quantity demanded using the sign + a decrease wing and an ambiguous effect on quantity demanded using the sign...
27. If consumers' income increases by one dollar and consumers consume both food and non-food, a....
27. If consumers' income increases by one dollar and consumers consume both food and non-food, a. spending on food consumption will always increase. b. spending on food consumption will increase but by less than one dollar if both food and non- food are normal goods. c. spending on food consumption will increase only if non-food is inferior good. d. spending on food consumption will increase only if non-food is normal good. 28. A reduction in the price of good A...
Answer True/False 1. A change in the price of a good will cause a shift in...
Answer True/False 1. A change in the price of a good will cause a shift in its demand curve. (2 marks) 2. An increase in consumers’ incomes will cause an expansion in the demand of all goods. (2 marks) 3. The price charged for a good is the equilibrium price. (2 marks) 4. An inferior good is one that has been badly produced. (2 marks) 5. Mad cow disease led to an increase in the price of pork. (2 marks)...
(unsure of selected answer) Assume that a consumer has well-behaved preferences. Following a price increase for...
(unsure of selected answer)
Assume that a consumer has well-behaved preferences. Following a price increase for good 1, we observe that a consumer increases the quantity demanded for good 1. From this, we know that O The pure substitution effect increases the consumption of good 1 O The pure substitution effect and the income effect must reinforce one another O Good 1 must be an inferior good. O both a and c O None of the above
O O QUESTION 1 1 point A decrease in price of a certain good most likely...
O O QUESTION 1 1 point A decrease in price of a certain good most likely will lead to a. no change in demand and no change in quantity demanded. b. an increase in quantity demanded but no change in the demand for that good. c. an increase in quantity demanded and an increase in the demand for that good. d. an increase in demand but no change in quantity demanded. QUESTION 2 1 poim Assume an economy with an...
D Question 1 1 pts Consider the market for raspberries in Australia. Which of the following...
D Question 1 1 pts Consider the market for raspberries in Australia. Which of the following would most likely lead to a decrease in demand O A decrease in the price of gooseberries, a substitute for raspberries. An increase in the price of blueberries, a complement for raspberries A decrease in income if raspberries are an inferior good. O A severe frost that destroys most of the Tasmanian raspberry crop. Both a and b are correct. DI Question 2 1...
Question 34 1 pts Economists estimated that the price elasticity of beer is 0.23 and the income elasticity of beer is -...
Question 34 1 pts Economists estimated that the price elasticity of beer is 0.23 and the income elasticity of beer is -0.09. This means that C a decrease in the price of beer will lead to an increase in revenue for beer sellers and beer is an inferior good. an increase in the price of beer will lead to a decrease in the quantity demanded of beer and beer is a necessity. an increase in the price of beer will...
Exercise 1: Decomposing the Total effect of a price change We wume that an individual consumes only two goods, Good 1 and Good 2. 1. We would like to decompose the total effect on quantity consumed of Good 1 and Good 2, following a price decrease for Good 2. Please fill out the following table. Note: Please denote an increase in quantity demanded using the sign + a decrease wing and an ambiguous effect on quantity demanded using the sign...
27. If consumers' income increases by one dollar and consumers consume both food and non-food, a. spending on food consumption will always increase. b. spending on food consumption will increase but by less than one dollar if both food and non- food are normal goods. c. spending on food consumption will increase only if non-food is inferior good. d. spending on food consumption will increase only if non-food is normal good. 28. A reduction in the price of good A...
(unsure of selected answer)
Assume that a consumer has well-behaved preferences. Following a price increase for good 1, we observe that a consumer increases the quantity demanded for good 1. From this, we know that O The pure substitution effect increases the consumption of good 1 O The pure substitution effect and the income effect must reinforce one another O Good 1 must be an inferior good. O both a and c O None of the above
O O QUESTION 1 1 point A decrease in price of a certain good most likely will lead to a. no change in demand and no change in quantity demanded. b. an increase in quantity demanded but no change in the demand for that good. c. an increase in quantity demanded and an increase in the demand for that good. d. an increase in demand but no change in quantity demanded. QUESTION 2 1 poim Assume an economy with an...
D Question 1 1 pts Consider the market for raspberries in Australia. Which of the following would most likely lead to a decrease in demand O A decrease in the price of gooseberries, a substitute for raspberries. An increase in the price of blueberries, a complement for raspberries A decrease in income if raspberries are an inferior good. O A severe frost that destroys most of the Tasmanian raspberry crop. Both a and b are correct. DI Question 2 1...
Question 34 1 pts Economists estimated that the price elasticity of beer is 0.23 and the income elasticity of beer is -0.09. This means that C a decrease in the price of beer will lead to an increase in revenue for beer sellers and beer is an inferior good. an increase in the price of beer will lead to a decrease in the quantity demanded of beer and beer is a necessity. an increase in the price of beer will...
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