The table above gives Sharon's demand for ground beef at two different income levels. Use the midpoint method in this problem
a. What is the percentage change in Sharon's income?
b. What is the percentage change in the quantity demanded?
c. What is Sharon's income elasticity of demand for ground beef?
d. Is ground beef a normal or an inferior good for Sharon?
a. The percentage change in Sharon's income is 20 percent.
b. The percentage change in the quantity of ground beef demanded is 80 percent.
c. Sharon's income elasticity of demand for ground beef is 4.00.
d. Because the income elasticity is positive, ground beef is a normal good for Sharon.
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A useful economic model
A. deals only with possibilities that actually occurred. B. makes only realistic assumptions. C. may make some unrealistic assumptions in order to simplify a complex reality. D. will avoid conclusions that have public policy implications, because economists do not make value judgments.
According to the economic theory of labor markets, new lawyers are eager to fill clerkships for judges, even at a miniscule wage, because:
a. the clerkship enhances future earnings possibilities. b. the total utility of nonmarket work and leisure is lower in case of clerkship. c. the income effect is smaller than the substitution effect for the higher-paying job. d. the income effect is equal to the substitution effect for the higher-paying job.
Altering the demographic of your workforce in a manner that increases the labor force, like raising a legal minimum retirement age, is likely to:
A. create more productive workers in all facets of the economy. B. lead to a sustainable high rate of growth in income for a country. C. lead to a higher level of income for a country. D. All of these are true.
You are hired by the Council of Economic Advisors (CEA) as an economic consultant. The chairperson of the CEA tells you that she believes the current unemployment rate is too high. The unemployment rate can be reduced if aggregate output increases. She wants to know what policy to pursue to increase aggregate output by $400 billion. The best estimate she has for the MPC is 0.8. Which of the following policies should you recommend?
A. reduce the budget deficit by $400 billion B. reduce taxes by $100 billion and increase government purchases by $50 billion C. increase government purchases by $100 billion D. reduce taxes by $100 billion