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# The price consumption curve shows us whether we spend more or less on a commodity when its price changes

The price consumption curve shows us:

A. whether we spend more or less on a commodity when its price changes

B. the changes in nominal income that occur for a price change of a good

C. the substitution effect of a price change

D. the total effect of a price change

3.If the price consumption curve of good X, which is on the horizontal axis, slopes downward, we can be sure that:

A. consumers spend less money on X even though they buy more of it

B. consumers spend the same proportion of their budget on X

C. consumers spend more money on X but they get more of X

D. consumers spend more money on X but they get less of X

4.The income consumption curve:

A. always goes through the origin

B. is always a straight line

C. has income on the vertical axis

D. is the same as the Engel curve

5.An Engel curve:

A. always slopes up for an inferior good

B. always slopes down for an inferior good

C. may slope up or down for a normal good

D. does not relate to the normal or inferior good concepts

6.The substitution effect is:

A. always greater than the income effect

B. always less than the income effect

C. never greater than the income effect

D. sometimes less than the income effect

7.The income effect:

A. moves in the opposite direction from the substitution effect for an inferior good

B. moves in the same direction as the substitution effect for an inferior good

C. relates to increases in nominal rather than real income

D. is always greater than the substitution effect

8.Comparing the income effects between salt and housing:

A. the income effect for salt will be greater

B. the income effect for housing will be greater

C. the two income effects will be about the same

D. the two income effects will be in the opposite direction

9.Suppose the price of public transportation increases. You know that the income effect of this increase is 5, the substitution effect is 10, but you do not know the signs. The total effect of the increase in the price of public transport could be either:

A. 15 or 5

B. 5 or - 5

C. -15 or 15

D. 5 or -15

10.For a Giffen good:

A. the income effect is greater than the substitution effect

B. the income effect is less than the substitution effect

C. the income effect is in the same direction of the substitution effect

D. the income effect is the same as the substitution effect

Feb 11 2020 View more View Less