Consider a consumer with a choice set that emerges from an exogenous income I. Suppose that, as a result of changes in a consumer's economic circumstances, the budget line rotates outward, with the vertical intercept remaining unchanged but the horizontal intercept shifting to the right. How could this have happened if the price of the good on the horizontal axis did not change?
What will be an ideal response?
If the price of the good on the vertical axis increases by the same proportion as income does. (The increase in income along causes a parallel shift outward, and the increase in the price of good 2 causes the slope to become shallower. If the two increase by the same percentage, the amount of good 2 that is affordable remains unchanged while the amount of good 1 that is affordable increases.)
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All of the following are examples of human capital except:
A. physical strength. B. an eye for decorating and color. C. a PhD in chemistry. D. an automotive manual.
Which of the following would maintain equilibrium without any changes in price or quantity?
a. supply unchanged; demand unchanged b. supply unchanged; demand decreases c. supply increases; demand unchanged d. supply unchanged; demand increases
The ultimatum bargaining game is a game in which:
A. the second player doesn't know the strategy choice of the first player. B. both players give each other an ultimatum. C. the first player confronts the second player with a take-it-or-leave-it offer. D. both players have a dominant strategy to cheat the other player.
The supply curve for a monopoly and for a perfectly competitive industry are virtually identical.
Answer the following statement true (T) or false (F)