Suppose your budget is spent entirely on two goods: bread and butter. If bread is an inferior good, can butter be inferior as well?
Answer to relevant QuestionsTrue or false: For a budget spent entirely on two goods, an increase in the price of one will necessarily decrease the consumption of both, unless at least one of the goods is inferior. Explain.a. For the demand curve P = 60 - 0.5Q, find the elasticity at P = 10.b. If the demand curve shifts parallel to the right, what happens to the elasticity at P = 10?Rank the absolute values of the price elasticities of demand at the points A, B, C, D, and E on the following three demandcurves.Explain in your own words why a gasoline tax whose proceeds are refunded to the consumer in a lump- sum amount will nonetheless reduce the consumption of gasoline.Jones spends all his income on two goods, X and Y. The prices he paid and the quantities he consumed last year are as follows: PX = 15, X = 20, PY = 25 and Y = 30. If the prices next year are PX = 6 and PY = 30, and ...
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