For Product X, the income elasticity of demand is -2.56. Which of the following is therefore TRUE?
A) Product X is a necessity.
B) Product X is a luxury.
C) Product X is an inferior good.
D) Product X is a normal good.
C
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The lottery this evening is worth $50 million dollars in your state. There are two people in your neighborhood that are buying lottery tickets. One is a student with little financial knowledge or business acumen
The other is a successful entrepreneur that is earning 20% rate of return on his business. Which of these people is likely to check off the "cash" option on the ticket and which is likely to choose the structured payout and why?
An individual derives utility from games, g (y-axis), and toy airplanes, a (x-axis), described by the utility function U(g,a) = g0.6a0.4. The price per game is $20 and the price of toy airplanes is $10. Using the slope of the income consumption curve (ICC), determine whether games and toy airplanes are normal or inferior goods when income increases from $100 to $200
A) Both goods are normal goods with an ICC slope of 3/4. B) Both goods are normal goods with an ICC slope of 4/3. C) Both goods are inferior goods with an ICC slope of -4/3. D) Both goods are inferior goods with an ICC slope of - 3/4.