Quiz 7

Question 1

The elasticity of calorie consumption concerning expenditure is 0.33. Which of the following interpretations is correct?

Answer 1

When expenditure increase by 10%, calorie consumption increases by 3.5%

Question 2

What does the elasticity of calorie consumption of 0.35 reveal about the poor’s food consumption behavior?

Answer 2

The poor display the characteristics described by the Engel Law

Question 3

The elasticity of overall food expenditure is 0.7. That is, if your budget increases by 10%, you will spend 7% of it on food. However, earlier we noted that the elasticity of calorie consumption was 0.35. What might explain this discrepancy?

Answer 3

The poor tend to buy more expensive food as they get richer, such as meat

Question 4

True or false: the substitution effect is always negative.

Answer 4

True