CRITICAL THINKING QUESTIONS

  1. Suppose the price of candy increases from $0.50 to $1 and the price of batteries rises from $2 to $4. Why is the opportunity cost of candy unchanged? Suppose your weekly spending money increases from $10 to $20. How is the budget constraint affected by all three changes? Explain.
  2. Think back to a purchase that you made recently. How would you describe your thinking before you made that purchase?
  3. Income effects depend on the income elasticity of demand for each good that you buy. If one of the goods you buy has a negative income elasticity, that is, it is an inferior good, what must be true of the income elasticity of the other good you buy?

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UH Microeconomics 2019 Copyright © by Terianne Brown; Cynthia Foreman; Thomas Scheiding; and Openstax is licensed under a Creative Commons Attribution 4.0 International License, except where otherwise noted.

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