QUESTION 6 Which of the following would cause a normal goods

QUESTION 6 Which of the following would cause a normal good\'s demand curve to shift to the left? O a. The input pnces increase. O b. The price decreases. o c. Income decreases o d. The price increases. e. Income increases QUESTION 7 Quantity Per Unit Per Week $6.0 $6.5 $7.0 $75 20 18 16 14 12 Accordimg to the above table, what is the absolute price elasticity of demand when price rises from S5.50 to $6? 0.50 O 2.23 O 4.00 O 1.21 QUESTION 8 The difference between a tax and a subsidy is that when the government places a tax on a good, it itthe equilibrium price and the equilibrium quantity, whereas when the government places a subsidy on a good, it the equilibrium price and the equilibrium quantity o a. increases; does not change, does not change; increases o b. decreases; decreases; increases; increases O c. increases: decreases: decreases; increases o d. decreases; increases; increases, decreases e. increases; increases; decreases, decreases

Solution

Q6. Answer is c. Income decreases Q7. Answer is 1.21 Explanation: Change in price: 0.5 Average price: 5.75 % change in price: 0.5/5.75 *100 = 8.69% Change in demand:2 Average demand: 19 % change in demand: 2/19 *100 = 10.53% Price elasticity of demand: 10.53% /8.69% = 1.21 Q8. Answer is c. Increase: Decrease and Decrease; increases