1.Chapter 4-- Income Elasticity (Normal and Inferior Goods)

a.The income elasticity of bottled water is 1.4.This implies that: the bottled water is: normal, inferior, substitute or complement. Explain?

b.Which good is most likely an inferior good: fur coats, ocean cruises, canned food, or steaks?

2.

Chapter 5 Study Problem #llr- Taxes, Deadweigl'rl: Less, and Elasticity 4. If the govermnent wants to raise tax revenue, which of the following items are good candidates for an excise tax?w11y? a. granola bars b. cigarettes c. toilet paper :1. automobile tires e. bird feeders 3". Use the followh'lg graph no answer questions a f. a. What area represents consumer surplus before the tax? Is. What area represents producer surplus before the tax? e. What area represents oonsuruer surplus after the tax? rt. What area represents producer surplus after the tart? e. What area represents the tat: revenue after the tax? 1'. What area represents thedeadweight loss after the tax? Che pterIIr-Questian for Review #B: Elasticity of Supply a. Give an example of a good that has elastic supply. What is the 1ualue ef the price elasticity if supply is elastic? Give an example of a good that has an inelastic supply. What is the value of the price elasticity if supply is inelastic