An individual derives utility from consuming "all other goods," g, and clean air (measured by the reduction in particulate matter per m3), a, as measured by the utility function U(g,a) = g0.6a0.4
The price of consumer goods equals $20 and the price of clean air (abatement) equals $10. What is the slope of the Engel curve when income increases from $100 to $200? A) The slope is 25.
B) The slope is -25.
C) The slope is zero.
D) The slope is infinite.
A
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Which of the following purchases is most likely to rise as the result of a temporary tax cut, according to the permanent-income hypothesis?
A) television sets and other consumer durables B) steak dinners and other consumer non-durables C) trips to the Virgin Islands and other vacation destinations D) theater tickets and other entertainment expenditures
Activists believe that ________
A) frictions to the self-correcting mechanism of markets prevent prices and wages from being very flexible B) it takes a very long time to reach the long run C) Keynes was right with his statement "in the long-run, we are all dead" D) all of the above E) none of the above