Question

Jacob recently graduated from college and was promoted from intern to a paid position.

Which of the following is most likely to change in his spending habits?

• Jacob's budget constraint will shift to the left if shown on a graph.

• Jacob will not respond as much to price changes in normal goods.

• Jacob will purchase more normal goods.

• Jacob will purchase fewer normal goods and more inferior goods.

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When Sam's Sandwiches were priced at $6, he sold 70 each day during lunch. When he reduced the price to $4 a sandwich, he sold 80 each day.

Using the midpoint formula, the own price elasticity for Sam's Sandwiches would be __________.

• -0.67

• -0.33

• 0.50

• 1.33

Answer 1

Jacob recently graduated from college and was promoted from intern to a paid position.

Which of the following is most likely to change in his spending habits?

Jacob will purchase more normal goods.

Due to the rise in income, Jacob's purchasing power will increase. His budget constraint will shift to the right. He will be able to purchase more of normal goods due to this. He will purchase less of inferior goods.

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When Sam's Sandwiches were priced at $6, he sold 70 each day during lunch. When he reduced the price to $4 a sandwich, he sold 80 each day.

Using the midpoint formula, the own price elasticity for Sam's Sandwiches would be (- 0.33)

As per the formula:

Ed = (- 0.33)