1. Draw the budget constraints, indifference curves, and the income consumption curve for a good that has an income elasticity that is perfectly inelastic on horizontal axis, and another normal good on the vertical axis. 2. Can a consumer have a perfectly inelastic income elasticity for every good they con- sume? Explain. 3. Koichiro and…
Read MoreWar Game, Inc., produces games that simulate historical battles. The market is small but loyal and War Game is the largest manufacturer. It is thinking about introducing a new game. War Game forecasts demand for this game to be P=50-.002Q, where Q is unit slaes per year and P is price in dollars. The cost…
Read MoreWhat is the impact of a tax cut in an economy operating under a flexible exchange rate regime on household spending, interest rates, investment spending, the current and capital accounts and the exchange rate. How will the central bank respond if it is targeting inflation? Will the central bank response offset or reinforce the impacts…
Read MoreGreener Grass Company (GGC) competes with its main rival, Better Lawns and Gardens (BLG), in the supply and installation of in-ground lawn watering systems in the wealthy western suburbs of a major east-coast city. Last year, GGC’s price for the typical lawn system was $1,995 compared with BLG’s price of $2,100. GGC installed 9,130 systems,…
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