Question

If the income elasticity of demand for lard is -3.00, this means that: lard is an...

If the income elasticity of demand for lard is -3.00, this means that:

lard is an inferior good.
more lard will be purchased when its price falls.
demand for lard is price inelastic.
demand for lard is price elastic

The more elastic the supply and the demand curves are:

the smaller surplus an effective price ceiling will create.
the greater surplus an effective price ceiling will create.
the greater shortage an effective price ceiling will create.
the smaller shortage an effective price ceiling will create.
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Answer #1

(1) If income elasticty is negative it means that as consumer income increases the demand for the good falls and we call such good as inferior good. If the income elasticity of demand for lard is -3.00, this means that: lard is an inferior good.

(2) The more elastic the supply and the demand curves are then even for a small decrease in price there will a relatively large fall in supply and relatively large increase in demand. Hence, The more elastic the supply and the demand curves are: the greater shortage an effective price ceiling will create.

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