If a good is income inelastic what does this imply would happen to consumption of this good if you were to win the lottery?
What will be an ideal response?
By definition an income inelastic good is one whereby the consumer does not change their consumption very much compared to the change of their income. If the consumption changes in the same direction by a percentage less than the change in income then the good in question is income inelastic or a necessity good. In the case of winning the lottery it is unlikely that consumption of the good in question will rise very much compared to the increase income from the winnings.
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In general, does the demand for labor become more or less elastic as we increase the number of other variable inputs used in a production process?
A) More elastic B) No change in elasticity C) Less elastic D) We cannot answer this question without more information about the other inputs
Many country inns shut down in the off-season because
a. the off-season market price falls below average total cost b. the off-season market price can't cover their average fixed cost c. the off-season revenue can't cover variable cost d. the off-season price is below the marginal cost of providing a room e. innkeepers are interested in maximizing revenue
The government component (G) of total output includes goods and services purchased by
a. the federal government plus transfer payments. b. all government institutions plus transfer payments. c. all government institutions. d. all government institutions plus tax revenues.
According to classical economists, the relationship between the amount of funds households plan to save and the interest rate is
A) indirect. B) inverse. C) direct. D) independent.