PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
7th Edition
ISBN: 9781260110920
Author: Frank
Publisher: MCG
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Chapter 3, Problem 4P
To determine
Categorize the goods as complements, substitutes, or both.
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Assume that a consumer finds that his total expenditure on compact discs stays the same after the price of compact discs declines. Which of the following is true for this price change?
Compact discs are inferior goods to this consumer.
The consumer's demand for compact discs increased in response to the price change.
The consumer's demand for compact discs is perfectly price elastic.
The consumer's demand for compact discs is perfectly price inelastic.
The consumer's demand for compact discs is unit price elastic.
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.
When there is a change in the price of a related good, demand increases or decreases depending on the relationship between the two goods.
Two economic terms describe these two relationships-substitutes and complements.
An increase in the price of Good A increases demand for Good B when the two goods are substitutes.
An increase in the price of Good A decreases demand for Good B when the two goods are complements.The graph shows the shift in the demand for good B when the price of good A increases depending on whether the two goods are substitutes or complements.
Pick from the bold choices below. pls look at the graph.
In Mexico, NAFTA had the result of lowering the price of used cars.
Consider the effect of the price of used cars on the demand for new cars in Mexico.
When the price of used cars in Mexico fell the Mexican demand for new cars
(Increase or decrease). This would cause the new car demand curve in Mexico to (Shift right or shift left). The price of new cars in Mexico would…
Assuming ceteris paribus (all other things being equal), discuss fully the effect of the following on a couple's demand for children and other goods:
Increase in a couple's income
Increase in the net price of children
Chapter 3 Solutions
PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
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- Refer to figure 6.1. Assume that L1 represents the budget line before a price change. Point C represents the: A) uncompensated effect on an increase in the price of soup B) compensated effect on a decrease in the price of soup C) uncompensated effect on a decrease in the price of soup D) compensated effect on an increase in the price of souparrow_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_forwardQ30 The marginal rate of substitution is the... a. Rate of substitution between the marginal values of any two goods. b. Rate of substitution between the total utility of any two goods. c. Substitution of one good for another as we move along the budget line. d. Amount of one good the consumer is willing to give up in exchange for another to keep total expenditure unchanged. e. Amount of one good the consumer is willing to give up in exchange for another to remain indifferent.arrow_forward
- Sienna gets a total of 20 utils per week from her consumption of pizza and a total of 40 utils per week from her consumption of yogurt. The price of pizza is $1 per slice, the price of yogurt is $1 per cup, and she consumes 10 slices of pizza and 20 cups of yogurt each week. Which of the following statements is correct regarding Sienna's current consumption of pizza and yogurt? Sienna should eat more yogurt and less pizza, as she is getting more utils from the $20 spent on yogurt than from the $10 spent on pizza. Sienna should eat more pizza and less yogurt, as she is getting more utils from her last dollar spent on pizza than her last dollar spent on yogurt. We cannot determine if Sienna is maximizing her total utility with the information provided. Sienna should eat more yogurt and less pizza, as she is getting more utils from her last dollar spent on yogurt than her last dollar spent on pizza.arrow_forwardSuppose that consumers experience a 5 percent increase in income and purchasing walking shoe increases by 6 percent. Based on your answer to the previous question, are walking shoes normal or inferior goods? Normal goods Inferior goods None of abovearrow_forwardAssuming ceteris paribus (all other things being equal), What are the effect of the following on a couple’s demand for children and other goods?1. Increase in a couple’s income 2. Increase in the net price of childrenarrow_forward
- The following are correct statements about the Income Effect (IE) and Substitution Effect (SE) coming from an increase in Px, EXCEPT: Question 7 options: I.E. is the result of a decline in Purchasing Power on consumers coming from an increase in Px. S.E. is the result of the substitution for alternative goods that the consumer implement as a result of an increase in Px. If two goods are close substitutes, then SE is stronger than IE. If two goods are complements, then IE is equal in proportion than SE.arrow_forwardQ19 Suppose a consumer can purchase only two goods: pasta and rice. Let the quantity of pasta be measured on the vertical axis and the quantity of rice be measured on the horizontal axis. If the price of pasta falls, with no change in the price of rice or in the consumer's money income, then the budget line for the consumer will rotate... a. Outward parallel to the existing budget line. b. Toward the origin and become flatter. c. Away from the origin and become steeper. d. Away from the origin and become flatter. e. Toward the origin and become steeper.arrow_forwardDiscuss fully the effect of each of the following to a couple’s demand for children and other goods. Answer at ceteris paribus. 1. Increase in a couple’s income 2. Increase in the net price of childrenarrow_forward
- A consumer must spend all of her income on two goods (X and Y). In each of the following scenarios, indicate whether the equilibrium consumption of goods X and Y will increase or decrease. Assume good X is an inferior good and good X is a normal good. a. Income doubles. b. Income quadruples and all prices double. c. Income and all prices quadruple. d. Income is halved and all prices double.arrow_forwardWhich of the following statements is correct? Suppose leisure is a normal good, then an increase in non-labor income always increases labor supply. Suppose leisure is a normal good, then an increase in wage rate increases labor supply if the income effect dominates the substitution effect. Suppose leisure is an inferior good, then an increase in non-labor income increases leisure hours. Suppose leisure is a normal good, then an increase in non-labor income reduces labor supply. 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_forwardMarket researchers estimate that the annual demand for ice cream in Gotham city is: qi = (200,000Pp1/4)/ (Pi3/2Pb1/2) where qi is the quantity demanded for ice cream in scoops, Pp is the price serving of pudding, Pb is the price per serving of brownies, and Pi is the price per scoop of ice cream. a. What does the cross-price elasticity of demand equal between ice cream and brownies? b. What type of commodities are ice cream and brownies?arrow_forward
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