Question

If a good is a normal good, its Engel curve should be

Question 1 options:

	decreasing
	None of the other answers is correct
	a horizontal line
	increasing

Question 2 (0.5 points)

Which of the following claims about inferior goods is correct?

Question 2 options:

	If a good is inferior, it will be so at all income levels (for the same individual)
	If a good is inferior it must be low quality
	When income goes up, the quantity demanded of the good goes down
	None of the other answers is correct

Question 3

What is the unit we measure elasticity with?

Question 3 options:

	Percent
	Elasticity has no units
	Dollars
	Miles

Question 4

What is a Giffen good

Question 4 options:

	A good which is strongly normal
	A Luxury good
	A good for which a price increase causes the quantity demanded to decrease
	A good for which a price increase causes the quantity demanded to increase

Question 5

Which of those are uses of the elasticity?

Question 5 options:

	Measuring the sensitivity of the quantity demanded to price
	Evaluating what will happen to revenue if we change price
	Deciding which good to purchase
	The first 2 answers are correct, but the 3rd one is not

Question 6

What are the income and substitution effects?

Question 6 options:

	A way to find if goods are substitutes to each other
	A way to break the change in quantity demanded when prices or income change, so we can separate changes in the quantity due to higher income from changes in the quantity due to differing price ratios
	All other answers are incorrect
	A way to compute exactly how revenue will change if the price of a good is changed

Question 7

What are perfect complements

Question 7 options:

	There is not such concept in the book. Compliments is what we want to discuss instead, not complements :)
	Complementary goods of very high quality
	Any goods which are not substitutes are perfect complements
	Complementary goods that are always consumed together in fixed proportions, because they have no use if they are consumer alone

Question 8

Which of the pairs of goods below are perfect substitutes?

Question 8 options:

	Oranges and orange juice
	Bus rides and train rides to the university
	A red pen and a blue pen to a color blind person. People who will read what he writes are also color blind.
	None of the other answers is correct

Question 9

Which of the below are determinants of the price elasticity of demand?

Question 9 options:

	Budget share
	All of the other answers are correct.
	Substitution possibilities
	Direction of the income effect

Question 10

Which of the following good do you expect to have the lowest price elasticity (in absolute value, so "lowest price elasticity" means least responsiveness to price in percentage terms)

Question 10 options:

	Movies
	Compact discs
	Cigarettes as a whole
	A certain brand of cigarettes

Answer 1

If a good is a normal good, its Engel curve should be increasing

Explanation:

Engel curve describes how a change in consumption of a particular commodity occurs with change in income.

In the following figure,with rise in income from M to M1 to M2, the consumer consumed more and more of commodity X and Y as both of them are normal goods.But below in the engel curve we have shown how increase in income increases the consumption of X .This provides us an increasing Engel curve.

(ICC IS THE INCOME CONSUMPTION CURVE)