Homework Answers
Answers :
A. Books are an inferior goods = False
B . Tea is a necessity = True
C. Books are a luxury good And tea is an inferior good = True
:)
> Tea is not a necessity
Ohsung Yang Thu, Dec 2, 2021 11:00 PM
A. Books are an inferior good. FALSE
When Chloe's income decreases, her consumption of books also decreases. This means the income effect is positive. For inferior goods, the income effect is negative. Therefore, books are not an inferior good.
B. Tea is a necessity. FALSE
When her income decreases, her consumption of tea increases, that means tea is an inferior good. Inferior goods have a negative income effect.
C. Books are a luxury good, and tea is an inferior good. TRUE
From part B, we know that the latter part of this statement is correct; tea is an inferior good. For part B, books, the income elasticity has a magnitude greater than one, |Eincome| > 1. This means books are a luxury good.
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> Tea is not a neccesity
Ohsung Yang Thu, Dec 2, 2021 11:00 PM