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Posts: 170
3 months ago

Question 1.

During an economic expansion as consumer incomes rise, holding everything else constant,

• the demand for most goods, except luxuries, will rise.

• the demand for luxuries will rise while the demand for inferior goods will fall.

• the demand for luxuries and inferior goods will rise.

• the prices of luxuries will fall while the prices of inferior goods will rise.

Question 2.

Studies show that the income elasticity of demand for wine is 5.03 and the income elasticity of demand for spirits is 1.21. This indicates that

• wine and spirits are luxury goods.

• wine is a luxury good and spirits are inferior goods.

• wine and spirits are highly price elastic.

• wine is a luxury good and spirits are necessities.
Source  Download
Microeconomics
Edition: 7th
Authors:
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3 months ago
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Answer 1

the demand for luxuries will rise while the demand for inferior goods will fall.

Answer 2

wine and spirits are luxury goods.
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3 months ago
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