7 Which of the following effects happen at the same time with a substitution effect?a. preferences effectO b. backward-bending supply curveO c. Giffen good effectd. income effect

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Which of the following effects happen at the same time with a substitution effect? O a. preferences effect O b. backward-bending supply curve Oc. Giffen good effect O d. income effect

Principles of Microeconomics

7th Edition

ISBN:9781305156050

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter21: The Theory Of Consumer Choice

Section: Chapter Questions

Problem 5CQQ

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Question

Which of the following effects happen at the same time with a substitution effect?
a. preferences effect
O b. backward-bending supply curve
O c. Giffen good effect
d. income effect

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Income Effects depend on the income elasticity of demand for each good limit you buy. If one of the goods you buy has a negative income elasticity, that is, it is an inferior good, what must be true of the income elasticity of the other good you buy?
6
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The diagram below shows the Total Effect (the sum of Income & Substitution Effects) when the budget line moves from BO to BI, it shows that; Substilie. Effact Toral Effect O a. Price of X increase and X is Giffen good. O b. Price of X decreases and X is normal good. O c. Price of X increase and X is inferior good. Price of X incregse and X is normgl good.
For normal goodsA) the substitution effect of a price decrease will decrease the quantity of the good demanded while theincome effect of a price decrease will increase the quantity of the good demanded.B) the substitution and income effects of a price decrease will both increase the quantity of the gooddemanded.C) the substitution and income effects of a price decrease will both decrease the quantity of the gooddemanded.D) the substitution effect of a price decrease will increase the quantity of the good demanded while theincome effect of a price decrease will decrease the quantity of the good demanded.
Q36
Ans
Answer
If Edna buys more pasta when the price of pastaincreases, we can infer that for Ednaa. pasta is a normal good for which the incomeeffect exceeds the substitution effect.b. pasta is a normal good for which the substitutioneffect exceeds the income effect.c. pasta is an inferior good for which the incomeeffect exceeds the substitution effect.d. pasta is an inferior good for which thesubstitution effect exceeds the income effect.
If the price pf pasta increases and a consumer buys more pasta, we can infer that a. pasta is a normal good and the income effect is greater than the substitution effect. b. pasta is a normal good and the substitution effect is greater than the income effect. c. pasta is an an inferior good and the income effect is greater is greater than the substitution effect. d. pasta is an inferior good and the substitution effect is greater than the income effect.
Which one of these goods is likely to have the largest substitution effect? Select one: a. Skittles candy b. Honda Accord c. Flour d. Electricity e. Gasoline
3. Every Friday for two months, Shelley visits her favorite pizza place and buys a large pepperoni and olive pizza. After nine weeks, she decides that she has grown tired of pepperoni and olive pizza, so she no longer buys it. This is an example of what principle of demand? A. substitution effect B. law of demand C. diminishing marginal utility D. income effect