Economics MCQ help

[Jane Voon]

Can someone help me pls

7 The table shows a consumer’s expenditure on a range of goods at different levels of income.
For which good does the consumer have an income elasticity of demand greater than zero, but
less than one?
consumer’s income ($)
40 50 100
good consumer’s expenditure ($)
A 10 18 40
B 10 11 20
C 10 10 10
D 10 8 6

ans:B why so

 

[M_MEGS27]

C is definitely eliminated.
YED = percentage change in qty dd divided by percentage change in price
Calculate YED for A,B and D.
YED of A(from 18 to 4o)= 1.22(>1= eliminated)
But the YED for B and D is less than 1!
Since YED is less than 1,it implies that the good is income inelastic: qty dd of the good will increase-less proportionately to income!
For D,qty dd is falling!!!
So,eliminate D.
Ans: B

 

[Jane Voon]

C is definitely eliminated.
YED = percentage change in qty dd divided by percentage change in price
Calculate YED for A,B and D.
YED of A(from 18 to 4o)= 1.22(>1= eliminated)
But the YED for B and D is less than 1!
Since YED is less than 1,it implies that the good is income inelastic: qty dd of the good will increase-less proportionately to income!
For D,qty dd is falling!!!
So,eliminate D.
Ans: B

Thank you

 

[M_MEGS27]

Ur welcome dear!

 

[Neil Shah]

Can someone help me pls

1. Suppose the average consumer’s expenditure is divided between bread, meat, milk and vegetables in the ratio 4:3:2:1.
   During the course of a year, the price of bread falls by 10%, the price of meat increases by 20% and the prices of both milk and vegetables increase by 10%.
   What is the increase in the average price level during the year? A 5% B 7.3% C 10% D 12.5%
   How is the ans A?

 

[Milind]

Can someone help me pls

1. Suppose the average consumer’s expenditure is divided between bread, meat, milk and vegetables in the ratio 4:3:2:1.
   During the course of a year, the price of bread falls by 10%, the price of meat increases by 20% and the prices of both milk and vegetables increase by 10%.
   What is the increase in the average price level during the year? A 5% B 7.3% C 10% D 12.5%
   How is the ans A?

it is actually quite easy

take the average consumer expenditure as 100
so if the ratios are:
4:3:2:1, the amount spend on each item becomes 40:30:20:10
now do the changes to the prices as said in the question, that makes the new prices 36:36:22:11
the total of the new prices = 105....calculate the change now:
(5/100)*100= 5%
There you go

 

[Nabeel.Ahmad]

Can someone help me pls

7 The table shows a consumer’s expenditure on a range of goods at different levels of income.
For which good does the consumer have an income elasticity of demand greater than zero, but
less than one?
consumer’s income ($)
40 50 100
good consumer’s expenditure ($)
A 10 18 40
B 10 11 20
C 10 10 10
D 10 8 6

ans:B why so

B.

 

[Neil Shah]

@

it is actually quite easy

take the average consumer expenditure as 100
so if the ratios are:
4:3:2:1, the amount spend on each item becomes 40:30:20:10
now do the changes to the prices as said in the question, that makes the new prices 36:36:22:11
the total of the new prices = 105....calculate the change now:
(5/100)*100= 5%
There you go

Milind hahahaha... lol that didn't strike me And welcome to Xtremepapers community!!