Consider the following:
(i) Can a good have both a downward-sloping Engel curve and a downward-sloping demand curve? Why or why not?
(ii) Can a good have both an upward-sloping Engel curve and an upward-sloping demand curve? Why or why not?
(i) Yes, the Engel and demand curves can both be downward sloping. This occurs when the good is inferior but not Giffen.
(ii) No, the Engel and demand curves cannot both be upward sloping. If the Engel curve is upward sloping, then the good must be normal. However, the law of demand always holds for normal goods, because the income effect reinforces the substitution effect in this case. Thus an upward-sloping Engel curve guarantees that the demand curve is downward sloping.
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a. Individual firm level b. Industry level c. Customer Level d. None of the above
Politicians and citizens may often choose policies that reduce economic efficiency because they are perceived as “fairer.”
Answer the following statement true (T) or false (F)
Everything else constant, the international trade effect indicates that aggregate expenditures in the domestic economy fall when:
a. domestic prices fall relative to foreign prices. b. domestic interest rates fall relative to foreign interest rates. c. domestic prices rise relative to foreign prices. d. domestic purchasing power rises relative to foreign purchasing power. e. domestic interest rates rise relative to foreign interest rates.
When consumers or businessmen stop collecting information to make decisions at the point where marginal cost of data collection equals the marginal utility of the data, economists would call the decisions based on existing data
a. perfect decisions. b. optimally imperfect decisions. c. joint decisions. d. rent seeking.