Question

1) Demand for an inferior good is ___________________.

a. Cannot be determined from the information

b. Upward sloping

c. Downward sloping

d. Inelastic

e. Elastic

2) Considering shoes and socks, to graph an Engel curve of shoes what must be true?

a. Utility is held constant

b. The price of shoes changes

c. The prices of shoes and socks are held constant

d. Cannot be determined from the information

e. Income is held constant

Answer 1

1.

An inferior good is a good whose demand decreases when income of a person increases. However, the demand curve for a good shows the relationship between price of a good and the quantity demanded at each price, holding things like income constant. It doesn't show the relationship between different income levels and quantity demanded at each income level. So, the demand for an inferior good will also be downward sloping, like other goods.

Ans c. Downward sloping

2.

The Engel curve shows the quantity demanded of a good at different income levels, holding the prices of the two goods constant. For constructing Engel curve of a good, say shoes, the prices of both goods-shoes and socks should be held constant.

Ans c. The prices of shoes and socks are held constant.