Briefly explain why you think the following statements are true, false, or uncertain. and explain each a. As income level rises, people tend to spend a higher portion of income on food, because food is normal food. b. The substitution effect and income effects of a price change move the quantity demanded in opposite directions for normal good. c. If the compensated (Hicks) and Marshall demand curves for a good intersect, at that point the Marshall curve will have a lower slope if this is a normal good.
Briefly explain why you think the following statements are true, false, or uncertain. and explain each
a. As income level rises, people tend to spend a higher portion of income on food, because food is normal food.
b. The substitution effect and income effects of a price change move the quantity demanded in opposite directions for normal good.
c. If the compensated (Hicks) and Marshall
d. The sum of the uncompensated cross-price elasticities of demand of good x with respect to changes in the prices of all other goods is equal to the negative of the uncompensated own-price elasticity of demand for good x.
e. The uncompensated own-price elasticity of demand for good X is always greater, in absolute value, than the compensated own-price elasticity of demand for good X.
f. Assume that marginal propensity to consume bread in Famagusta is 10% and average propensity to consume bread is 20%, then income elasticity of bread will be 0.5.
g. Two goods are Hicks (net) substitutes if a rise in the price of one causes an increase in the quantity demanded of the other holding utility constant.
h. The price elasticity of demand for a linear demand curve follows the pattern (moving from high prices to low prices) inelastic, elastic, unit elastic.
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