Why can't all goods be inferior?
What will be an ideal response?
If all goods were inferior, an increase in income would lead to a decline in the quantity demanded for all goods. This, however, would leave the consumer below the budget line and therefore not achieving the highest utility possible.
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Suppose a tax is imposed on sellers. The more inelastic the demand for the taxed item, the
A) greater the share of the tax paid by sellers. B) smaller the deadweight loss from the tax. C) larger the decrease in consumption because of the tax. D) All of the above answers are correct.
In the specific factors model, a 5% increase in the price of food accompanied by a 10% increase in the price of cloth will cause ________ in the welfare of labor, ________ in the welfare of the fixed factor in the production of food, and ________ in
the welfare of the fixed factor in the production of cloth. A) an ambiguous change; a decrease; an increase B) an ambiguous change; an ambiguous change; an ambiguous change C) a decrease; an ambiguous change; an ambiguous change D) an increase; a decrease; an increase E) an ambiguous change; an increase; a decrease