a) Jim buys gingerbread and candy, both of which are normal goods. When the price of gingerbread rises, the income effect induces Jim to buy _______ gingerbread and ________ candy. b) Jim buys candy and gingerbread, both of which are normal goods. When the price of gingerbread rises, the substitution effect induces Jim to buy_______gingerbread and________ candy.
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a) Jim buys gingerbread and candy, both of which are normal goods. When the price of gingerbread rises, the income effect induces Jim to buy _______ gingerbread and ________ candy.
b) Jim buys candy and gingerbread, both of which are normal goods. When the price of gingerbread rises, the substitution effect induces Jim to buy_______gingerbread and________ candy.
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- When Sam has an income of $1,000, he consumes 30 units of good A and 50 units of good B. After Samâs income increases to $1,500, he consumes 60 units of good A and 40 units of good B. Which of the following statements is correct? Both goods A and B are inferior goods Both goods A and B are normal goods Good A is a normal good, and good B is an inferior good Good A is an inferior good, and good B is a normal goodquantity of bread 100 90 80 70 60 50 40 30 20 10 B 10 20 30 40 50 60 7080 quantity of apples Juan is a consumer of apples and bread. Juan shifts his consumption bundle from point B to point A. Which of the following is true? Juan's demand curve for apples shifted left and demand curve for bread shifted right. Juan's demand curve for both apples and bread shifted right. Juan's demand curve for apples shifted left and demand curve for bread shifted left. Juan's demand curve for apples shifted right and demand curve for bread shifted left.If consumers buy less of a commodity when their incomes rise, this commodity is ( an inferior good , or a normal good ) ? . When the price of this commodity rises, the substitution effect is ( negative or postive) and the income effect is ( negative or postive) ? . So the net result for consumption of this commodity ( depends on which effect dominates , is an increase , is a decrease) ? .
- According to a recent study, "Stricter college alcohol policies, such as raising the price of alcohol, or banning alcohol on campus, decrease the number of students who use marijuana." On the basis of this information, how would you describe alcohol and marijuana? They are both luxury goods. There is no relationship between the two goods. The two goods are substitutes in consumption. The two goods are complements in consumption.Two students, Nick and Sofia, are discussing normal and inferior goods. Nick says that if Frodo buys more beer when the price of beer goes up, then beer must be an inferior good for Frodo. If, on the other hand, he buys less beer when the price of beer goes up, then beer must be a normal good for Frodo. Sofia disagrees: "Normal and inferior goods are about income changes, not price changes. Therefore, we do not have enough information: beer could be an inferior or normal good in either of these cases." Do you agree or disagree? Carefully explain your point of view. Support your argument with graphs of income, substitution and total effects (please put beer on the horizontal axis and the other goods on the vertical axis). Please assume that Frodo's preferences over beer and other goods are strictly convex and satisfy "more is better" assumption.Raphael consumes only cheese and crackers. True or False: Cheese and crackers can both be inferior goods for Raphael. True or False Suppose that cheese is a normal good for Raphael while crackers are an inferior good. If the price of cheese falls, Raphael's consumption of crackers (decrese or increase) ? and his consumption of cheese ( decrese or increase) ? .
- Economist George Stigler once wrote that, according to consumer theory, “if consumers do not buy less of a commodity when their incomes rise, they will surely buy less when the price of the commodity rises.” What kind of commodity was Stigler referring to? A normal good An inferior good When the price of this commodity rises, the substitution effect is (positive / negative) and the income effect is (positive / negative). So the net result for consumption of this commodity (depends on which effect dominates / is a decrease / is an increase).Suppose that Dale consumes only coffee and cheese, both of which have diminishing marginal utility. For each of the following cases, determine whether Dale should 1Consume more coffee and less cheese, or2Consume less coffee and more cheese: 1.The marginal rate of substitution of cheese for coffee is 3 (i.e., the marginal utility of cheese is three times the marginal utility of coffee), while the price ratio is 2 (i.e., cheese costs twice as much as coffee). 2.The marginal rate of substitution of cheese for coffee is 1 (i.e., the marginal utility of cheese is equal to the marginal utility of coffee) while the price ratio is 2 (i.e., cheese costs twice as much as coffee). 3.The marginal rate of substitution is initially equal to the price ratio, but the price of coffee increases. 4.The marginal rate of substitution is initially equal to the price ratio, but the price of cheese decreases. 5.The marginal rate of substitution is initially equal to the price ratio, but Dale enters exam…Bob consumes food and housing. Suppose his marginal utility from an additional unit of food is 20 and his marginal utility from an additional unit of housing is 180. Furthermore, suppose the price of a unit of food is $1.00 and the price of a unit of housing is $2.00. Can Bob increase his utility without changing his total expenditures on food and housing? Holding expenditures constant, A. Bob can increase utility by spending more on food and less on housing. B. Bob can increase utility by spending more on food and the same amount on housing. C. Bob can increase utility by spending less on food and more on housing. D. Bob cannot increase his utility. E. Bob can increase utility by spending more on food and more on housing.
- Economist George Stigler once wrote that, according to consumer theory, “if consumers do not buy less of a commodity when their incomes rise, they will surely buy less when the price of the commodity rises.” What kind of commodity was Stigler referring to? An inferior good A normal good When the price of this commodity rises, the substitution effect is and the income effect is . So the net result for consumption of this commodity .consider a consumer who consumes only two goods :peas and beans. She has an income of K10, the price of beans is k0.20 while the price of peas is0.40.a) Draw the budget lineb) Suppose that the consumer consumes 30kg of beans. Assuming that she spends all her income, how many kgs of peas is she going to consume?c) Assume that the price of peas falls from k0.40 to k0.20. Assuming that the consumer still consumes 30kg of beans, find the new quantity of peas.d) After the decrease in price of peas to k0.20 assume that the consumer is just as well off as she was in (b) if she has an income of K7.60. However, with that income and the new price of peas, she would have consumed 20kg of beans. Find the quantity of peas she would have consumed in this case. Show it on the graph.Complete each of the following sentences: Your tastes determine the _____________ you derive from consuming a particular good. _______________ utility is the change in ________________ utility resulting from a _______________ change in the consumption of a good. As long as the marginal utility is positive, total utility is ____________________________. The law of diminishing marginal utility states that as an individual consumes more of a good during a given time period, other things constant, total utility ________________________.