Question 43 Suppose that consumers' preferences are well behaved in that properties 4-1 to 4-4 are...
Question 43
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Suppose that consumers' preferences are well behaved in that properties 4-1 to 4-4 are satisfied. Furthermore, assume that both X and Y are inferior goods and the price of good Y increases. Then the substitution effect will lead consumers to consume:
more of good X and more of good Y.
less of good X and more of good Y.
less of good X and less of good Y.
more of good X and less of good Y.
Homework Answers
If the price of good Y increases then consumer will consume more of good X and less of good Y. In case of inferior good substitution effect is negative if price increases we will substitute other good(good X).
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Question 43
Suppose that consumers' preferences are well behaved in that
properties 4-1 to 4-4 are...
Suppose that consumers' preferences are well behaved in that properties 4-1 to 4-4 are satisfied. Furthermore,...
Suppose that consumers' preferences are well behaved in that properties 4-1 to 4-4 are satisfied. Furthermore, assume that both X and Y are normal goods and that the price of good X increases. Then, which of the following effects is known with certainty? The income and substitution effects reinforce one another, leading to an overall increase in the consumption of good X. The income and substitution effects reinforce one another, leading to an overall decrease in the consumption of good...
(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
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...
Question 1 (1 point) (1 Point) We assume that the representative consumer's preferences exhibit the properties...
Question 1 (1 point) (1 Point) We assume that the representative consumer's preferences exhibit the properties that Oa) they evolve over time and that more is always preferred to less. Ob) more is sometimes preferred to less and that consumption and leisure are both normal goods c) more is preferred to less and that the consumer prefers diversity d) the consumer likes diversity and that more is sometimes preferred to less. Question 2 (1 point) (1 Point) A good is...
Question 14 (1 point) If the price of good x changes relative to good y, the...
Question 14 (1 point) If the price of good x changes relative to good y, the substitution effect suggests that consumers will: buy more of the cheaper good and less of the more expensive. buy more of the more expensive good and less of the cheaper. buy more of both goods. buy less of both goods Question 15 (1 point) As consumers consume more of a good, we expect marginal utility to Increase Decrease Remain constant. Impossible to tell.
a consumers income is $100. prices of goods X and Y are $1 per unit. suppose...
a consumers income is $100. prices of goods X and Y are $1 per unit. suppose the consumer facing such prices chooses the bundle that includes 60 units of good Y. next, the price of good X increases to $2 per unit. the consumer's new choice involves a bundle with 40 units of good X. is X a normal good,an inferior good,or is there insufficient information to answer this question? explain using a graph and the concepts of income and...
Suppose Norah consumes only two goods, x and y. Which of the following statements MUST be...
Suppose Norah consumes only two goods, x and y. Which of the following statements MUST be true? (Note, consider each statement independently) 1. If the price of x increases keeping income and price of y fixed, she will consume more of x if x is inferior good. II. If the price of x increases keeping income and price of y fixed, she will consume more of y if y is an inferior good. III. If the price of y increases...
3. Suppose that Bob’s preferences can be represented by the utility function u(x, y) = 32x^0.5...
3. Suppose that Bob’s preferences can be represented by the utility function u(x, y) = 32x^0.5 + y. The MUx = 16x^-0.5 and MUy = 1. (a) Determine Bob’s demand functions for x and y. (b)If the price of x is $8, and Bob’s income is $1000, how many x would Bob consume? How much income would be devoted to spending on y? (c) Suppose that the price of x doubles to $16. Calculate the income and substitution effects. (d)Is...
1. (a) Suppose you spend all of your income on apples and oranges, which are both...
1. (a) Suppose you spend all of your income on apples and oranges, which are both normal goods and which are imperfect substitutes. If the price of apples increases, will you consume more or fewer apples as a result of the substitution effect? What about the income effect? (b) Suppose you consume two goods: Ramen and Starbucks coffee. Ramen is an inferior good and Starbucks coffee is a normal good. The price of Ramen increases. Assume Ramen is not a...
1) Dave consumes two normal goods, X and Y, and is currently at an optimum....
1) Dave consumes two normal goods, X and Y, and is currently at an optimum. If the price of good X falls, we can predict with certainty that a. the substitution effect will be positive for good X and negative for good Y. b. Dave will consume more of both goods because his real income has risen. c. Dave may consume more or less of good X, but he will...
(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
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...
Question 1 (1 point) (1 Point) We assume that the representative consumer's preferences exhibit the properties that Oa) they evolve over time and that more is always preferred to less. Ob) more is sometimes preferred to less and that consumption and leisure are both normal goods c) more is preferred to less and that the consumer prefers diversity d) the consumer likes diversity and that more is sometimes preferred to less. Question 2 (1 point) (1 Point) A good is...
Question 14 (1 point) If the price of good x changes relative to good y, the substitution effect suggests that consumers will: buy more of the cheaper good and less of the more expensive. buy more of the more expensive good and less of the cheaper. buy more of both goods. buy less of both goods Question 15 (1 point) As consumers consume more of a good, we expect marginal utility to Increase Decrease Remain constant. Impossible to tell.
Suppose Norah consumes only two goods, x and y. Which of the following statements MUST be true? (Note, consider each statement independently) 1. If the price of x increases keeping income and price of y fixed, she will consume more of x if x is inferior good. II. If the price of x increases keeping income and price of y fixed, she will consume more of y if y is an inferior good. III. If the price of y increases...
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