Quiz 13

Question 1

Which of these individuals are most likely hurt by an increase in food prices? (Check all that apply)

Answer 1

1. A poor manual laborer living in a city

2. A poor taxi driver living in a city

Question 2

Suppose that an individual increase her income by 10% and as a result spends 4% more on food and increases total calories consumed by 2%. Based on these numbers, which is more responsive or sensitive to changes in income?

Answer 2

Food expenditure

Question 3

The capacity curve defines the relationship between wages earned and____. Implicit in this relationship is that wages earned today enable____.

Answer 3

The capacity to work; higher consumption of food or nutrition

Question 4

Suppose the price of rice rises and the price of quinoa (a normal good that is a substitute for rice) is unchanged. Then the substitution effect predicts that quinoa consumption will___i___while the income effect predicts that quinoa consumption will___ii___. Combining these two effects, we expect that overall quinoa consumption will___iii___.

Answer 4

i. Increase
ii. Decrease
iii. Increase or decrease; it depends