Would you expect the income elasticity of demand for Cadillacs to be positive or negative? Why is this true?
What will be an ideal response?
The income elasticity of demand for Cadillacs should be positive because Cadillacs are a normal good. When income rises, the demand for Cadillacs will rise as well.
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An increase in price results in increase in supply but not an increase in the quantity supplied
Indicate whether the statement is true or false
When firms in a purely competitive industry are earning profits that are greater than normal, the supply of the product will tend to decrease in the long run.
Answer the following statement true (T) or false (F)
Income inequality is
A. Often greatest in the poorest countries. B. An issue because households in the lowest quintile receive more than their share of income. C. Often greatest in the richest countries. D. Not an issue in the United States because of the redistribution of income through the federal tax system.
As you move down the production possibility frontier, the absolute value of the marginal rate of transformation
A. increases. B. initially decreases, then increases. C. decreases. D. initially increases, then decreases.