1. Emilio buys pizza for $10 and soda for $2. He has d. 4, 2 Charlie buys only m
ID: 1126588 • Letter: 1
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1. Emilio buys pizza for $10 and soda for $2. He has d. 4, 2 Charlie buys only milk and cereal. Milk is a normal good, while cereal is an inferior good. When the price of milk rises, Charlie buys a. less of both goods. b. more milk and less cereal. c. less milk and more cereal. d. less milk, but the impact on cereal is ambiguous. a parallel outward shift if which of the following events occur? a. 4. The price of pizza falls to $5, the price of soda falls to $1, and his income falls to $50. b. The price of pizza rises to $20, the price of soda rises to $4, and his income remains the same. c. The price of pizza falls to S8, the price of soda falls to $1, and his income rises to $120. 5. If the price of pasta increases and a consumer buys d. The price of pizza rises to $20, the price of soda rises to $4, and his income rises to $400. more pasta, we can infer that a. pasta is a normal good, and the income effect is 2. At any point on an indifference curve, the slope of the greater than the substitution effect. b. pasta is a normal good, and the substitution effect curve measures the consumer's a. income. is greater than the income effect. b. willingness to trade one good for the other c. pasta is an inferior good, and the income effect is c. perception of the two goods as substitutes or greater than the substitution effect d. pasta is an inferior good, and the substitution effect complements. d. elasticity of demand Matthew and Susan are both optimizing consumers in the markets for shirts and hats, where they pay $100 for a shirt and $50 for hat. Matthew buys 4 shirts and 16 hats, while Susan buys 6 shirts and 12 hats. From this information, we can infer that Matthew's marginal rate of substitution is hats per shirt, while is greater than the income effect. The labor-supply curve slopes upward if a. leisure is a normal good b. consumption is a normal good. c. the income effect on leisure is greater than the 3, 6· substitution effect. d. the substitution effect on leisure is greater than the Susan's is income effect. b. 2, 2Explanation / Answer
1. D
Explanation: The budget constraint will face a parallel outward shift when consumption of both the goods (pizza and soda) increases by the same proportion.
In option A, consumption of pizza and soda remains the same. So, the budget constraint will remain the same. So, Option A is invalid.
In option B, consumption of pizza and soda will go down and the budget constraint will shift towards the left. So, Option B is invalid.
In option C, consumption of soda changes by a larger proportion that the consumption of pizza. So, the budget curve will shift towards the right but the shift will not be parallel. So, option C is invalid.
In option D, consumption of soda and pizza both doubles i.e. change by the same proportion. So, the budget curve will have a parallel shift towards the right. So, option D is valid.
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