Quiz 2 - The coefficient of income elasticity of demand for...

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Quiz 2 1. The supply of product x is elastic if the price of x rises by: 5 percent and quantity supplied rises by 7 percent 2. An antidrug policy which reduces the supply of heroin might; Increase street crime because the addicts demand for heroin is highly inelastic 3. Assume that a 3 percent increase in income in the economy produces a 1 percent decline in the quantity demanded of good x.
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Unformatted text preview: The coefficient of income elasticity of demand for good x is: Negative and therefore x is an inferior good 4. An efficiency loss (or deadweight loss): Is measured as the combined loss of consumer surplus and producer surplus 5. The construction of demand and supply curves assumes that the primary variable influencing decisions to produce and purchase goods is: price...
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