Macroeconomics
13th Edition
ISBN: 9780134735696
Author: PARKIN, Michael
Publisher: Pearson,
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Question
Chapter 9, Problem 29APA
(a)
To determine
The income effect and substitution effect.
(b)
To determine
The normal good or inferior good.
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Students have asked these similar questions
What is the difference between the income effect and the substitution effect of aprice increase for a normal good?
Compare the following two pairs of goods and answer the following questions about complements, substitutes and the income and substitution effects:
(1) Coke and Pepsi(2) Shoes and socks
In which case will a consumer respond more to a change in the relative price of the two goods?
Suppose when a person’s income increases, his or her demand for mac and cheese decreases. What is the relationship between mac and cheese and income?
Mac and cheese are Substitutes
Mac and cheese are a Normal good
Mac and cheese are an Inferior good
Mac and cheese are unaffected by changes in income
Chapter 9 Solutions
Macroeconomics
Ch. 9.1 - Prob. 1RQCh. 9.1 - Prob. 2RQCh. 9.1 - Prob. 3RQCh. 9.1 - Prob. 4RQCh. 9.1 - Prob. 5RQCh. 9.2 - Prob. 1RQCh. 9.2 - Prob. 2RQCh. 9.2 - Prob. 3RQCh. 9.2 - Prob. 4RQCh. 9.3 - Prob. 1RQ
Ch. 9.3 - Prob. 2RQCh. 9.3 - Prob. 3RQCh. 9.3 - Prob. 4RQCh. 9.3 - Prob. 5RQCh. 9 - Prob. 1SPACh. 9 - Prob. 2SPACh. 9 - Prob. 3SPACh. 9 - Prob. 4SPACh. 9 - Prob. 5SPACh. 9 - Prob. 6SPACh. 9 - Prob. 7SPACh. 9 - Prob. 8SPACh. 9 - Prob. 9SPACh. 9 - Prob. 10SPACh. 9 - Prob. 11SPACh. 9 - Prob. 12APACh. 9 - Prob. 13APACh. 9 - Prob. 14APACh. 9 - Prob. 15APACh. 9 - Prob. 16APACh. 9 - Prob. 17APACh. 9 - Prob. 18APACh. 9 - Prob. 19APACh. 9 - Prob. 20APACh. 9 - Prob. 21APACh. 9 - Prob. 22APACh. 9 - Prob. 23APACh. 9 - Prob. 24APACh. 9 - Prob. 25APACh. 9 - Prob. 26APACh. 9 - Prob. 27APACh. 9 - Prob. 28APACh. 9 - Prob. 29APACh. 9 - Prob. 30APA
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Similar questions
- Economists define normal goods as having a positive income elasticity. We can divide normal goods into two types: Those whose income elasticity is less than one and those whose income elasticity is greater than one. Think about products that would fall into each category. Can you come up with a name for each category?arrow_forwardRecent research confirms that the demand for cigarettes is not only inelastic, but it also indicates that smokers with incomes in the lower half of all incomes respond to a given price increase by reducing their purchases by amounts that are more than four times as large as the purchase reductions made by smokers in the upper half of all incomes. How can the income and substitution effects of a price change help explain this finding?arrow_forwardPlease answer fastarrow_forward
- Sita buys only two items form the market—bread and jeans. Her income and the price of bread is constant. As jeans become costlier she buys less bread. Which of the following does this imply. Why? price elasticity of demand for jeans is less than 1 (one) Jeans are a luxury Bread is an inferior good There is no substitution effect in this casearrow_forwardWhen there is a change in price, there is an income effect and a substitution effect. Which is larger? The substitution effect or the income effect? Explainarrow_forwardJerry spends his entire budget on bread and gasoline. His preferences are complete, transitive, monotonic, and convex. For Jerry, bread is an inferior good that follows the law of demand. Moreover, his cross-price elasticity of demand for gasoline with respect to the price of bread is negative. Suppose the price of bread increases, all else constant. a. Create a chart to show the total, income, and substitution effects on bread and gasoline of the increase in the price of bread. b. Use budget lines and indifference curves to graphically illustrate the three effects. Be sure to label each effect on your graph (or through the chart from part a) and plot bread on the x-axis and gasoline on the y-axisarrow_forward
- Consider the demand for tea. If(a) the price of a substitute good (for example, coffee) increases(b) the price of a complement good (for example, sugar) increases,what will happen to the demand for tea? Why or why not? Explain and illustrate your answer with a graph.arrow_forwardQ.2 Which two pairs of goods likely have a relatively weak negative cross price elasticity for most people? Select one: a. Peanut butter and computers. b. Sprite and Coca Cola. c. Sausages and ketchup. d. Beef and fish. e. chocolate milk and skim milk.arrow_forwardIf a good is a Normal Good and its price decreases, what are the directions of the Substitution Effect and the Income Effect? Both are increases Both are decreases The Substitution Effect is an increase while the Income Effect is a decrease The Substitution Effect is a decrease while the Income Effect is an increasearrow_forward
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