Principles of Economics, 7th Edition (MindTap Course List)
7th Edition
ISBN: 9781285165875
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Question
Chapter 21, Problem 4QCMC
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.
Mary 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.
Maria 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 goods
Chapter 21 Solutions
Principles of Economics, 7th Edition (MindTap Course List)
Ch. 21.1 - Prob. 1QQCh. 21.2 - Prob. 2QQCh. 21.3 - Prob. 3QQCh. 21.4 - Prob. 4QQCh. 21 - Prob. 1QRCh. 21 - Prob. 2QRCh. 21 - Prob. 3QRCh. 21 - Prob. 4QRCh. 21 - Prob. 5QRCh. 21 - Prob. 6QR
Ch. 21 - Prob. 7QRCh. 21 - Prob. 1QCMCCh. 21 - Prob. 2QCMCCh. 21 - Prob. 3QCMCCh. 21 - Prob. 4QCMCCh. 21 - Prob. 5QCMCCh. 21 - Prob. 6QCMCCh. 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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- When consumers' incomes increased 10 percent, the quantity of milk bought increased 5 percent. This result means A. milk is a luxury. B. milk is a necessity. C. the demand for milk is income elastic. D. milk is an inferior good.arrow_forwardJoseph, who consumes wine and cheese, gets a raise, so his income increases from {300 to 700. a. What happens if both wine and cheese are normal goods? b. What happens if cheese is an inferior good?arrow_forwardDraw 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 increasesarrow_forward
- Demand curves slope downward because, other things held equal, a. An increase in a product’s price lowers MU. b. A decrease in a product’s price lowers MU. c. A decrease in a product’s price raises MU per dollar and makes consumers wish to purchase more units. d. An increase in a product’s price raises MU per dollar and makes consumers wish to purchase more units.arrow_forwardIdentify the type of goods which have zero cross elasticity of demand. a. Normal goods b. Independent goods c. Dependent goods d. Substitute goodsarrow_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_forward
- 3. A person who consumes wine and cheese gets a raise, so his income increases from $3000 to $4000. Show what happens if both wine and cheese are normal goods. Now show what happens if cheese is an inferior good.arrow_forwardSuppose 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_forwardWhich of the following is true concerning the income effect of a decrease in price? A. It will lead to an increase in consumption only for an inferior good. В. It will lead to an increase in consumption only for a Giffen good. C. It always will lead to an increase in consumption. It will lead to an increase in consumption only for a normal good. B. D.arrow_forward
- Equilibrium is achieved when quantity demanded intersect with quantity supplied. Assume aproduct “Mobile Phone” for which supply and demand shifts. You are required to prepare graphs of each situation given below?a. Increase in income: Mobile Phone is a normal good.b. Increase in income: Mobile Phone is an inferior good.c. Decrease in the price of a substitute for Mobile Phone.d. Decrease in the price of a complement for Mobile Phone.e. Increase in the cost of production of Mobile Phone.f. Decrease in the cost of production of Mobile Phone.arrow_forwardNadia consumes two goods, food and clothing. The price of food is $2,the price of clothing is $5,and her income is $1,000. Nadia always spends 40 percent of her income on food regardless of the price of food, the price of clothing, or her income. 1. What is her price elasticity of demand for food? 2. What is her cross-price elasticity of demand for good with respect to the price of clothing?arrow_forwardSohail’s income declines and as a result, he buys more pumpkin juice. Is pumpkinjuice an inferior or a normal good? What happens to Sohail’s demand curve forpumpkin juice?arrow_forward
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