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True/ False
Income and consumption has a direct relationship for the normal goods.
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- Calculate the equilibrium income by using the consumption function formula. 1. Y =C 2. Y= C+I 3. Y = C+I+G 4. Y= C+I+G+Nx Given: C = 100; I = 150; G = 100; m= 50; x=35; change in DY = 900; change in C = 630The reason the substitution effect works to encourage a consumer to buy less of a product when its price increases is: a. the product is now relatively more expensive than it was before. b. other products are now relatively more expensive than they were before. c. the real income of the consumer has been increased. d. the real income of the consumer has been decreasedWhat are the determinants for an individual demand? Derive with the help of indifferencecurves and the budget constraint the optimal consumption plan. How do you transfer theoptimal consumption plan into an individual demand function? (use graphs)
- If we assume the sizes of the slopes are known, and if we apply an assumption for a given level of income and for the prices of a related good, how does equation Qd =B+BxPx+BmM+ByPy collapse into equation Qd =B+BxPx?What are the determinants for an individual demand? Derive with the help of indifferencecurves and the budget constraint the optimal consumption plan. How do you transfer theoptimal consumption plan into an individual demand function?What is it mean by full price and income when discussing household consumption?
- Draw a consumption function for an individual whereS=-250+0.3Y. Show the change that would result from an increase in Income.Research shows that in countries where incomes are high and continue to exhibit an increasing trend, couples decide to have less children. Children are regarded as a/an _______________ goodAn analyst for a major apparel company estimates that the demand for its raincoats is given by ln Qdx = 10 − 1.2 ln Px + 3 ln R − 2 ln Ay where R denotes the daily amount of rainfall and Ay represents the level of advertising on good Y. What would be the impact on demand of a 10 percent increase in the daily amount of rainfall? What would be the impact of a 10 percent reduction in the amount of advertising directed toward good Y? Can you think of a good that might be good Y in this example?
- If the ratio of consumption C to income Y is c, then the ratio of income to consumption is: a. 1/(1+c) b. 1-c c. 1/c d. 1/(1-c)The relationship between a consumer’s income and the quantity of X, he consumes is given by the equation M=1000Q2Draw the consumption function as the relation of the consumer's income and expenditure. What does the slope of the consumption function depend on? Is the consumer's income the only factor determining the level of his consumption spending?