According to the textbook, for most goods and services-foods, beverages, entertainment, etc.-the income elasticity of demand is:
A. larger in the short run than in the long run.
B. larger in the long run than in the short run.
C. about the same in the short run and in the long run.
D. is difficult to differentiate from the short run to the long run.
B. larger in the long run than in the short run.
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Billy's income elasticity of demand for ground beef is -0.5 and his income elasticity of demand for pork chops is 1.2 . Is ground beef a normal or inferior good? Explain. What about pork chops?
What will be an ideal response?
Suppose a local union has a contract that calls for the nominal wage to increase by 5 percent plus 100 percent of any increase in the CPI. If the CPI increases by 4% and there is a 1% positive bias in the inflation rate, by how much would nominal wages unnecessarily increase?
a. 9 percent b. 1 percent c. 5 percent d. 3 percent e. 4 percent