Author Question: In the short run, a change in the equilibrium price will A) always lead to inflation. B) cause a ... (Read 40 times)

dejastew · **on:** Jul 1, 2018

In the short run, a change in the equilibrium price will

A) always lead to inflation.
B) cause a shift in the demand curve.
C) cause a shift in the supply curve.
D) cause a change in the quantity demanded or supplied.

Question 2

A typical consumer spends 30 of income on housing and housing is a necessity for consumers (the income elasticity for housing is 0 < H < 1 ). What are the maximum and minimum values for the income elasticity of all other goods, O?

What will be an ideal response?

Carissamariew · **Reply #1 on:** Jul 1, 2018

Answer to Question 1

D

Answer to Question 2

The weighted income elasticities must sum to 1:
0.3H + .7O = 1
The maximum value H = 1 yields O = 1. The minimum value H = 0 yields O = 1.42.