When the Shaffers had a monthly income of $4,000, they usually ate out 8 times a month. Now that the couple makes $4,500 a month, they eat out 10 times a month. Compute the couple's income elasticity of demand using the midpoint method. Explain your answer. Is a restaurant meal a normal or inferior good to the couple?
The income elasticity of demand for the Shaffers is 1.89 . Since the income elasticity of demand is positive, eating out would be interpreted as a normal good.
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Which of the following statements is NOT true?
A) Unemployment in the US economy represents an excess demand for labor. B) A surplus may be reduced by shifting the demand curve rightward. C) A surplus may be reduced by shifting both the supply and demand curves. D) A shortage may be reduced by shifting the supply rightward.
When consumers and firms are driven by rational self-interest and they seek to maximize utility and profit respectively, then a parallel assumption would be that elected officials attempt to:
a. best serve the public interest. b. maximize hours worked. c. maximize their political support. d. fight for the oppressed and the disenfranchised, regardless of the political consequences.
If a 1 percent increase in the price of DVD players leads to a 3 percent reduction in the number of DVD players sold, we can conclude that
A. the demand for DVD players is relatively inelastic. B. the demand for DVD players is relatively elastic. C. DVD players are inferior goods. D. the supply of DVD players is perfectly inelastic.
Social Security and Medicare are examples of
A) capitalism. B) free market functions. C) market failures. D) governmental interventions.