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# Quiz3Answers - Extra Credit(3 points Maria has decided...

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Economics 20A Winter 2008 Quiz #3 1. (10 points) Susan wants to start her own business, which would require her to buy a factory that costs \$400,000. Susan currently has \$500,000 in the bank earning 3 percent interest per year. If she buys the factory with her own money, what is the annual opportunity cost of the factory? Answer : \$400,000*0.03 = \$12,000
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Unformatted text preview: Extra Credit (3 points) Maria has decided always to spend one-third of her income on clothing. What is her income elasticity of clothing demand? Answer : This comes from the textbook, question 5 on page 110. If her income doubles, she will double her spending on clothing. So the income elasticity of demand is 1....
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