Economics Homework Three Answers - Student Three

Shanna

1. An example of a good that has a large price elasticity is computers or other forms of technology. When the price of a computer goes down, even a little, the demand typically increases.

Excellent.

2. When your income increase you will spend money and more likely luxury or normal goods. However, you income decreases, you will spend less money and only by your needs and may buy inferior goods until your income increases again.

Good, but incomplete. Income elasticity is specific to each good. (Minus 1)

3. A nearly perfect elastic demand curve is flat horizontal in shape; a nearly perfect inelastic demand curve is flat vertical in shape.

Correct.

4. Necessities are the goods we need. They are income inelastic. They are needed and purchased regardless of our income level. Examples would be basic food and clothing to get by. A luxury is a good we want. It income elastic don't generally purchase luxuries in hard economic times.

Excellent.

5. A substitute for french fries is potatoes that have not been cooked, cut, or peeled. A compliment for french fries is Ketchup or ranch dressing.

Superb, but note spelling: complement.

6. An example of a normal good is shoes such as Nike tennis shoes. The demand goes up as income goes up. An example of an inferior good is a bag of frozen french fries bought at the store. I can buy them for $.99 or less, but when I have more income, I can go to McDonalds or a local cafe to purchase them at a higher cost.

Terrific.

7. A price ceiling that is set below the equilibrium will cause a shortage because the quantity supplied is less than the quantity demanded thus creating a shortage of the good.

Excellent.

Great work! 69/70.--Andy Schlafly 22:21, 26 September 2009 (EDT)