midterm2_practice_solution

midterm2_practice_solution - UCLA Economics 11 Fall 2006...

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1 UCLA Economics 11 – Fall 2006 Professor Mazzocco MIDTERM 2 NAME: _______________________________________ID:____________________ TA:__________________________________________________________________ Part 1: Multiple Choice (4 points each) 1. If the prices of all goods increase by the same proportion as income, the quantity demanded of good X will a. decrease. b. increase. c. remain unchanged. d. change in a way that cannot be determined from the information given. 2. If income doubles and the quantity demanded of good X more than doubles, then good X can be described as a a. substitute good. b. complement good. c. necessity. d. luxury. 3. If an individual buys only two goods and these must be used in a fixed relationship with one another (e.g., coffee and cream for a coffee drinker who never varies the amount of cream used in each cup), then a. there is no substitution effect from a change in the price of coffee. b. there is no income effect from a change in the price of coffee. c. Giffen's Paradox must occur if both coffee and cream are inferior goods. d. an increase in income will not affect cream purchases.
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4. In the Slutsky equation for P / X j i , the income effect is given by a. I / X X i i . b. I / X X i j . c. I / X X j i . d. I / X X j j . Questions 5 use the following definitions for an individual who consumes only two goods: s X = share of income spent on X . s Y = share of income spent on Y . e P , X X = price elasticity of demand for X . e
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This note was uploaded on 11/17/2010 for the course ECON 11 taught by Professor Cunningham during the Spring '08 term at UCLA.

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midterm2_practice_solution - UCLA Economics 11 Fall 2006...

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