The Fisher index A) uses the arithmetic mean of the Paasche index and the Laspeyres index. B) uses the standard deviation of the Paasche index and the Laspeyres index. C) uses the geometric mean of the Paasche index and the Laspeyres index. D) uses the harmonic mean of the Paasche index and the Laspeyres index. […]
Date: September 9th, 2020
Under which of the following conditions will there be no substitution bias in the CPI? A) Lower-priced goods increase in price by a greater percentage than do higher-priced goods. B) Higher-price goods increase in price by a greater percentage than do lower-priced goods. C) All goods change in price by the same amount. D) All […]
Date: September 9th, 2020
If a good is considered a normal good, the demand curve will shift ________ when income increases because ________. A) right; the income and substitution effects move in the same direction. B) right; the income and substitution effects move in the opposite direction. C) left; the income and substitution effects move in the same direction. […]
Date: September 9th, 2020
In the case of a normal good, A) demand curves always slope downward. B) the income effect and substitution effect are in the same direction. C) the Engel curve slopes upward. D) All of the above. ANSWER D
Date: September 9th, 2020
For an inferior good, if the income effect more than offsets the substitution effect, we call that good A) a Giffen good. B) a normal good. C) an inferior good. D) a neutral good. ANSWER A
Date: September 9th, 2020
When the price of a good changes, the income effect can be found by comparing the equilibrium quantities purchased A) on the old budget line and the new budget line. B) on the original indifference curve when faced with the original prices and when faced with the new prices. C) on the new budget line […]
Date: September 9th, 2020
When measuring the substitution effect, one uses the change along A) the old indifference curve. B) the new indifference curve. C) either the old or the new indifference curve. D) the budget constraint. ANSWER A
Date: September 9th, 2020
Suppose Lisa spends all of her money on books and coffee. When the price of coffee decreases, the A) substitution effect on coffee is positive, and the income effect on coffee is positive. B) substitution effect on coffee is ambiguous, and the income effect on coffee is ambiguous. C) substitution effect on coffee is positive, […]
Date: September 9th, 2020
What is the primary difference between the substitution and the income effect of a price change? A) The substitution effect holds income constant and the income effect holds utility constant. B) The substitution effect is always positive and the income effect is always negative. C) The substitution effect holds utility constant and the income effect […]
Date: September 9th, 2020
The Affordable Care Act is intended to reduce the price of health care. A decrease in the price of health care may A) increase the number of doctors office visits if office visits are considered an inferior good and the substitution effect dominates the income effect. B) decrease the number of doctors office visits if […]
Date: September 9th, 2020
