Author Question: A 2 percent increase in income increases the quantity demanded of a good by 1 percent. The income ... (Read 281 times)

Engineer · **on:** Jun 29, 2018

A 2 percent increase in income increases the quantity demanded of a good by 1 percent. The income elasticity of demand for this good is _______. The good is a _______ good.

A. 2; normal
B. 2; inferior
C. 1/2; normal
D. 2; inferior

Question 2

Suppose that the local hospital claims that the wages of nurses are too high. Yet, the hospital has 10 nursing positions open and no applicants for the jobs. Is the hospital's claim legitimate? Why or why not?

What will be an ideal response?

kxciann · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

C The income elasticity of demand equals (1 percent) (2 per-cent); it is positive so the good is a normal good.

Answer to Question 2

No. Since the quantity of nurses demanded is greater than the quantity supplied, there is a shortage of nurses. Thus, the wage currently paid to nurses must be below the market equilibrium wage.