9. The substitution effect is:A. always greater than the income effect.B. always less than the income effect.C. never greater than the income effect.D. sometimes less than the income effect.10. The income elasticity of demand for an inferior good could be:A: one.B. negative.C. zero.D. two.11. Say the demand curve for cigarettes was given by Q-164-0.38P. When P- €20,a further increase in the price will:A. increase total revenue by 20 percent.B. increase total revenue.C. leave total revenue the same.D. increase total revenue by 10 percent.12. Colin's demand for golf at his local club each season is P-50-20. If the golfcourse charges €26 per round of golf, what is the maximum membership fee that thegolf club can charge Colin?A. €1,250B. €144C. €288D. €31213. If the government wanted to curb the consumption of alcohol by taxing alcoholwithout hurting consumer welfare, it would:A. raise the tax on alcohol until the demand for alcohol became elastic.B. need to know the substitution effect but not the income effect of a tax hike.C. need to know the income effect but not the substitution effect of a tax hike.Page 3 of 7D. tax alcohol but compensate consumers so as to eliminate the income effect of theprice increase.

Introduction We have four type of goods: normal, inferior, necessary and luxury. Income elasticity…

Answered: 10. The income elasticity of demand for…

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10. The income elasticity of demand for an inferior good could be: A. one. B. negative. C. zero. D. two.

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

9. The substitution effect is:
A. always greater than the income effect.
B. always less than the income effect.
C. never greater than the income effect.
D. sometimes less than the income effect.
10. The income elasticity of demand for an inferior good could be:
A: one.
B. negative.
C. zero.
D. two.
11. Say the demand curve for cigarettes was given by Q-164-0.38P. When P- €20,
a further increase in the price will:
A. increase total revenue by 20 percent.
B. increase total revenue.
C. leave total revenue the same.
D. increase total revenue by 10 percent.
12. Colin's demand for golf at his local club each season is P-50-20. If the golf
course charges €26 per round of golf, what is the maximum membership fee that the
golf club can charge Colin?
A. €1,250
B. €144
C. €288
D. €312
13. If the government wanted to curb the consumption of alcohol by taxing alcohol
without hurting consumer welfare, it would:
A. raise the tax on alcohol until the demand for alcohol became elastic.
B. need to know the substitution effect but not the income effect of a tax hike.
C. need to know the income effect but not the substitution effect of a tax hike.
Page 3 of 7
D. tax alcohol but compensate consumers so as to eliminate the income effect of the
price increase.

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