lab4 - October 18-22, 2010 Economics 203: Intermediate...

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October 18-22, 2010 Economics 203: Intermediate Microeconomics I Lab Exercise #4 Section 1: Test Your Understanding True or False? 1) A commodity’s income elasticity of demand may be positive or negative. 2) The income elasticity of demand for food is very high. Section 2: discussion Suppose you are a trustee of a major university. At a meeting of the board of trustees, one university official argues that the demand for places in the student body at this university is completely inelastic. As evidence, he cites the fact that, although the university has doubled its tuition in the last decade, there has been no appreciable decrease in the number of students enrolled. Do you agree? Section 3: Applications: 1) According to the U.S. Department of Agriculture, the income elasticity of demand for coffee is about 0.23. If income rose by 1 percent, what effect would this have on the quantity demanded of coffee? 2)
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lab4 - October 18-22, 2010 Economics 203: Intermediate...

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