a 15 percent increase in Income causes a 30 percent increase in quantity demande

Question

a 15 percent increase in Income causes a 30 percent increase in quantity demanded, this product might a. have no close substitute. b. be a luxury c. be part of a broadly defined market. s. Ifa d, be showing high income elasticity in a short time horizon The following two quest ions are based on the diagram, below: Panel (a) Panel (b) Supply Supply Rent contro P: Rent Control Demand 6. In the figure shown, Panel (a) a. represents binding price ceiling (rent control) at price Pt. b. represents binding price ceiling (rent control) at price P2. c. represents a binding price floor (rent control) at price P. d. represents a binding price floor (rent control) at price P2 7. In the figure shown, which panel(s) best represent(s) a binding rent control in the long run at price P2? a. panel (a) b. panel (b) c. neither panel d. both panels

Explanation / Answer

5) luxury good

When quantity increases more when price decreases. We have elastic demand and those goods are luxury goods.Option d is incorrect because we are not given any information about the time.

6) c and b both are correct.

When government sets price above equilibrium then we have binding price floor. When government sets price below equilibrium price then we have binding price ceiling.

7) b is correct.

Only panel b represents long run binding price ceiling as in long run supply curve is positively sloped.

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