Quinn's income to spend each month on two normal goods, bowling or eating out, is $100. It costs $10 to bowl for the night, and it costs $20 for Quinn to eat at a restaurant. Quinn currently consumes four nights of bowling and three meals at a restaurant. If the price of bowling increased to $15, the income effect would predict:
A. Quinn would consume more of each good.
B. Quinn would consume less bowling and more meals out.
C. Quinn would consume less of each good.
D. Quinn would consume more bowling and less meals out.
Answer: C
You might also like to view...
If increased capital usage reduces the firm's short-run demand for labor, then
a. labor is a regressive factor. b. labor and capital are complements in production. c. labor and capital are substitutes in production. d. labor is a Giffen factor.
Meredith receives a wage hike. If Meredith decides to work an extra hour
A) her reservation wage rate exceeds her value of marginal product. B) her opportunity cost of leisure is high. C) her substitution effect is greater than her income effect. D) she operates on the backward-bending portion of her labor supply curve.
An important category of bias in human decision making is:
A. temptation. B. revealed preference. C. ease of the decision-making process. D. All of these are important sources of bias in decision making.
How are aggregate supply and stagflation related?
a. Stagflation usually causes an adverse shift in aggregate supply. b. An adverse supply shift usually causes stagflation. c. Stagflation only follows inflation, with no relation to aggregate supply. d. There is no relationship between the two.