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Author Question: Joe's income is 500, the price of food (F, y-axis) is 2, and the price of shelter (S, x-axis) is ... (Read 32 times)

jilianpiloj

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on: Jul 1, 2018
Joe's income is 500, the price of food (F, y-axis) is 2, and the price of shelter (S, x-axis) is 100. Which of the following bundles is in Joe's opportunity set?
 
  A) 50 units of food, 5 units of shelter
  B) 200 units of food, 2 units of shelter
  C) 100 units of food, 1 unit of shelter
  D) 150 units of food, 3 units of shelter

Question 2

Jill consumes nothing but soup and cola. If cola is a luxury good for Jill, then soup must be a necessity.
 
  Indicate whether the statement is true or false


dantucker

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Reply #1 on: Jul 1, 2018
Answer to Question 1

C

Answer to Question 2

True . The weighted sum of income elasticities must sum to one. Because the income elasticity of cola is >1, the income elasticity of soup must be <1.


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