CRITICAL THINKING QUESTIONS
- 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.
- Think back to a purchase that you made recently. How would you describe your thinking before you made that purchase?
- 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?