An individual derives utility from consuming “all other goods,” g, and clean air (measured by the reduction in particulate matter per m3), a, as measured by the utility function U(g,a) = g0.6a0.4. The price of consumer goods equals $20 and the price of clean air (abatement) equals $10. What is the slope of the Engel […]
Sandy derives utility from consuming “all other goods,” g, and clean air (measured by particulate matter removed per m3), a, as measured by the utility function U(g,a) = g0.6a0.4. The price of “all other goods” is $20 and the price of clean air (abatement) equals $10. Brian is the only other consumer in the market […]
Suppose the quantity of x is measured on the horizontal axis. If the income consumption curve is vertical, then the income elasticity of demand for x is A) 0. B) 1. C) -1. D) There is not enough information to determine the income elasticity of demand for x. ANSWER A
A movement upward along an upward sloping Engel curve corresponds to A) upward sloping indifference curves. B) crossing indifference curves. C) a rotation in the budget constraint. D) a parallel shift in the budget constraint. ANSWER D
An inferior good exhibits A) a negative income elasticity. B) a downward sloping Engel curve. C) a decline in the quantity demanded as income rises. D) All of the above. ANSWER D
If consumer income and prices increase by the same percentage, A) the consumer will buy more of both goods. B) the consumer will buy more of both goods if they are both normal goods. C) the consumer will buy less of both goods if they are both inferior goods. D) the consumer’s utility maximizing bundle […]
Ten individuals have $100 and identical preferences for picnics, p, and kayak trips, k, where U(p, k) = k0.5p0.5. The price of picnics is $5 and the price per kayak trip is $ 10. What is the shortage/surplus in the market when the supply of picnics totals 120? A) There is a surplus of 20. […]
If the price-consumption curve is upward sloping when the price of the good measured on the horizontal axis changes, then the demand curve for that good will be upward sloping. Indicate whether the statement is true or false ANSWER False. An upward-sloping price-consumption curve indicates that as the price of the good falls, more […]
Consumers do not prefer gifts-in-kind to cash gifts. Indicate whether the statement is true or false ANSWER True . It is possible the consumer would buy the same gift with cash and therefore be just as well off. If the consumer bought something other than the gift, that means that this something else is […]
Behavioral economists use which technique to test economic theory? A) controlled experiments B) price theory C) environmental economics D) lie detector tests ANSWER A
