What happens to consumer expenditure for both inelastic and elastic goods when the price increases? And how does this situation impact the budget constraint? Elaborate your answer by giving an example and illustration!
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- Economists define normal goods as having a positive income elasticity. We can divide normal goods into two types: Those whose income elasticity is less than one and those whose income elasticity is greater than one. Think about products that would fall into each category. Can you come up with a name for each category?Income effects depend on the income elasticity ofdemand for each good that you buy. If one of the goodsyou buy has a negative income elasticity, that is, it is aninferior good, what must be true of the income elasticityof the other good you buy?|Unit 3 Midterm Economics A docs.google.com/forms/d/e/1FAlpQLSfDzcagnpq9EUKBs3AWMb. a change in quantity demanded for one product or service causes a change in simple demand for a related product or service. * In 2. O Elasticity of Demand O Cross Elasticity of Demand O Diminishing Marginal Utility O Cost-Benefit Analysis O All of These O None of These The rules of the price system operate in all markets of a capitalist/market economy. The market where consumers earn income Market. by selling resources to business resources is called O Consumer
- For normal goodsA) the substitution effect of a price decrease will decrease the quantity of the good demanded while theincome effect of a price decrease will increase the quantity of the good demanded.B) the substitution and income effects of a price decrease will both increase the quantity of the gooddemanded.C) the substitution and income effects of a price decrease will both decrease the quantity of the gooddemanded.D) the substitution effect of a price decrease will increase the quantity of the good demanded while theincome effect of a price decrease will decrease the quantity of the good demanded.Ms. Zamai spends his entire income on pizzas and siomai. She always buys positive quantities of both supposed that the cross price elasticity of demand for pizzas with respect to the price of siomai is negative. If siomai's are an ordinary good, when the price of siomai increases, What is the effect on Ms. Zamai expenditures of siomai and pizzas? Explain your answerA consumer's weekly income is $5000, the price of a cell phone is $1250, and the price of a watch is $500. What quantity of cell phones and watches will maximize the consumer's utility if they spend their entire weekly income on cell phones and watches? Explain your using I. answer marginal Suppose that this consumer's income elasticity for watches is analysis. 5.4. what does this indicate about watches? If the cross-elasticity calculates to 0.8 what does this indicate about the relationship between watches and cell phones?
- Quèstion 9 Income elasticity will be negative for inferior goods O True O FalseIllustrate and explain how consumer equilibrium is achieved using the indifference curve?Discuss how the demand elasticity of a product changes? Give examples.QUESTION 8 The demand for bicycles decreases by 10 as a result of an increase in the price of bicycles. The substitution effect alone would predict a decrease of 12 units. We can conclude that O a. Bicycles are a Giffen good O b. Bicycles are inferior goods OG Bicycles have a positive elasticity of demand with respect to income O d. Substitution and income effects have the same magnitude O e. None of the proposed answers is correct
- Q.2 Which two pairs of goods likely have a relatively weak negative cross price elasticity for most people? Select one: a. Peanut butter and computers. b. Sprite and Coca Cola. c. Sausages and ketchup. d. Beef and fish. e. chocolate milk and skim milk.If milk and Cheerios are such known to be complements the consumer consumes either one of this goods or the other Is it true or false?If the income elasticity coefficient for fish tacos is 0.25, then fish tacos are: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a b C d normal goods because the demand for fish tacos increases when income increases. normal goods because the demand for fish tacos decreases when income increases. inferior goods because the demand for fish tacos increases when income increases. inferior goods because the demand for fish tacos decreases when income increases.