Which of the following is not a valid relationship?
a. For a normal good: demand for a good increases when income falls.
b. For a normal good: demand for a good decreases when income falls.
c. For an inferior good: demand for a good decreases when income rises.
d. For an inferior good: demand for a good increases when income falls.
a
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Holding other factors constant, if the income tax is replaced with a consumption tax so that saving is not taxed, then the real interest rate will ________ and the equilibrium quantity of saving and investment will ________.
A. increase; increase B. increase; not change C. decrease; increase D. increase; decrease
In the steady state of Solow's exogenous growth model, an increase in total factor productivity
A) increases output per worker and increases capital per worker. B) increases output per worker and decreases capital per worker. C) decreases output per worker and increases capital per worker. D) decreases output per worker and decreases capital per worker.
Suppose you are the manager of a large cardboard box industry. In the industry, there are 10 very large firms and 15 small firms. You are aware that the very large firms have a greater marginal benefit from industrywide advertising compared to the small firms. Which of the following payment plans is least likely to create discord across the participating firms?
A) Have each firm pay the exact same fee. B) Have each firm pay the average marginal benefit of industrywide advertising across all firms. C) Place the very large firms into Group 1 and the small firms into Group 2 and require the firms in each respective group to pay the same amount with the firms in Group 1 paying a fee that is greater than the fee paid by Group 2 firms. D) Place the very large firms into Group 1 and the small firms into Group 2 and require the firms in each respective group to pay the same amount with the firms in Group 1 paying a fee that is smaller than the fee paid by Group 2 firms.
A price floor set below the equilibrium price will cause which of the following?
A) an increase in demand B) a shortage C) a surplus D) none of the above