Bundle: Principles of Microeconomics, 7th + LMS Integrated Aplia, 1 term Printed Access Card
7th Edition
ISBN: 9781305242463
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Chapter 21, Problem 4CQQ
To determine
The impact of increased income on normal and inferior goods.
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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.
James consumes two types of goods: fruit and clothing. Fruits cost him $ 2 per unit, clothing costs $ 25 per unit, and his
income is $ 1,000. He always spends 40% of his income on fruit, regardless of the price of fruit and clothing, as well as his
income.
a. What is the cross-price elasticity of its demand for fruit relative to the price of clothing?
b.What is the elasticity-income of its fruit demand?
Detail your answers.
Draw a demand curve for pizza. What happens to the demand curve in each of the following scenarios?a. The price of Coca-Cola increases, assuming that pizza and Coca-Cola are complementary goods in consumption.b. Income increases and pizza is considered a normal good.c. The price of burritos decreases, assuming that pizza and burritos are substitutes in consumption. d. The price of pizza increases
Chapter 21 Solutions
Bundle: Principles of Microeconomics, 7th + LMS Integrated Aplia, 1 term Printed Access Card
Ch. 21.1 - Prob. 1QQCh. 21.2 - Prob. 2QQCh. 21.3 - Prob. 3QQCh. 21.4 - Prob. 4QQCh. 21 - Prob. 1CQQCh. 21 - Prob. 2CQQCh. 21 - Prob. 3CQQCh. 21 - Prob. 4CQQCh. 21 - Prob. 5CQQCh. 21 - Prob. 6CQQ
Ch. 21 - Prob. 1QRCh. 21 - Prob. 2QRCh. 21 - Prob. 3QRCh. 21 - Prob. 4QRCh. 21 - Prob. 5QRCh. 21 - Prob. 6QRCh. 21 - Prob. 7QRCh. 21 - Prob. 1PACh. 21 - Prob. 2PACh. 21 - Prob. 3PACh. 21 - Prob. 4PACh. 21 - Prob. 5PACh. 21 - Prob. 6PACh. 21 - Prob. 7PACh. 21 - Prob. 8PACh. 21 - Prob. 9PACh. 21 - Prob. 10PACh. 21 - Prob. 11PACh. 21 - Prob. 12PACh. 21 - Prob. 13PA
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- Owen saw that the price of peaches had gone down, and so he decided to buy more peaches. Based on this information only, what does Owen's reaction reflect? Choose 1 answer: A Owen's demand for peaches has increased. B Owen's quantity demanded for peaches has increased. Owen has experienced an increase in income. Owen observed that there has been an increase in the price of other fruit, a substitute for peaches. Owen expects future price changes.arrow_forwardMary makes the following choices of X1 and X2 when prices and income are as follows: X1 X2 P1 P2 I Week 1 10 20 2 1 40 Week 2 6 14 2 2 40 A. Mary considers both goods to be normal goods B. We cannot say whether Mary thinks the goods are normal or inferior. C. X1 is a normal good and X2 is an inferior good for Mary D. X1 is an inferior good and X2 is a normal for Mary Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.arrow_forwardMaria graduates from college and her income increases by $45,000. Nothing else changes. Maria decreases the quantity of donuts and pretzels that she buys and increases the quantity of ski trips that she buys. How would Maria describe these goods? For Maria, A. donuts and ski trips have become substitutes B. ski trips and pretzels are normal goods C. donuts and pretzels have become complements OD. ski trips are normal goodsarrow_forward
- 3) For Nour doughnuts and muffins are perfect substitutes. Doughnuts are £4 a box and muffins are £3 a box. The boxes hold equal numbers. Nour has budgeted £48 a month to spend on these sweets. Which of the following is correct? (a) Nour will buy 12 boxes of doughnuts and no muffins per month. (b) Nour will buy 6 boxes of doughnuts and 8 boxes of muffins per month. (c) Nour will buy no doughnuts and 16 boxes of muffins per month . (d) From this information it cannot be determined how many muffins or doughnuts Nour will buy because the marginal utilities for muffins and doughnuts are not given. 4) The supply of sugar is given by Q, = -50 + 1/2 P. Determine the arc price elasticity of supply between Q = 40 and Q = 100. (a) 7/12. (b) 2. (c) 12/7 . (d) 3/28. (e) None of the above.arrow_forwardSuppose that a decrease in the price of X results in less of good Y sold. What are X and Y called? A. substitute goods B. complementary goods C. normal goods D. inferior goodsarrow_forwardQ16 The substitution effect of a price change leads consumers to _____ their demand for goods whose prices have risen. The income effect leads consumers to buy less of all _____ goods whose prices have risen. a. Reduce; Giffen. b. Reduce; normal. c. Reduce; complement. d. Increase; inferior. e. Increase; normal. Clear my choicearrow_forward
- Suppose that a consumer spends a fixed amount of income per month on the following pairs of goods: a.tortilla chips and salsab.tortilla chips and potato chips. movie tickets and gourmet coffee d.travel by bus and travel by subway If the price of one of the goods increases, explain the effect on the quantity demanded of each of the goods. In each pair, which are likely to complement and which are likely to be substituted?arrow_forwardHow will the elasticity of demand be affected in the following cases? C. The budget share increases for normal goods. D. The budget share increases for inferior goods.arrow_forwardJerry spends his entire budget on bread and gasoline. His preferences are complete, transitive, monotonic, and convex. For Jerry, bread is an inferior good that follows the law of demand. Moreover, his cross-price elasticity of demand for gasoline with respect to the price of bread is negative. Suppose the price of bread increases, all else constant. a. Create a chart to show the total, income, and substitution effects on bread and gasoline of the increase in the price of bread. b. Use budget lines and indifference curves to graphically illustrate the three effects. Be sure to label each effect on your graph (or through the chart from part a) and plot bread on the x-axis and gasoline on the y-axisarrow_forward
- how do I illustrate an increase in a price of an item resulting in consumers buying another itemarrow_forwardThe diagram shows Sam's budget line. Which of the following would result in Sam's budget line shifting leftward and not changing its slope?arrow_forwardQ43 Laurie spends all of her money buying bread and cheese. The marginal utility she receives from the last loaf of bread is 60 and from the last block of cheese is 30. The price of bread is $3 and the price of cheese is $2. Laurie... a. Should buy more cheese and less bread to maximise her utility. b. Should buy more bread and more cheese in order to maximise her utility. c. Spends too much money on bread and cheese. d. Should buy more bread and less cheese in order to maximise her utility. e. Is buying currently the utility-maximising amount of bread and cheese.arrow_forward
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