Suppose that commodity prices are strictly positive. Consider the following utility functions. One of these utility functions has no income effect on good for a certain range of income. Identify it.
Tap an option to check your answer.
4 marks, −1MicroeconomicsDemand theory and elasticityIncome elasticity, normal and inferior goods and Engel curvesHardabout 3 min
DSE 2021 Question 18: Demand theory and elasticity
Answer and worked solution
Checking your account…
Plain-text version
Suppose that commodity prices are strictly positive. Consider the following utility functions. One of these utility functions has no income effect on good X for a certain range of income. Identify it. (A) u(x,y) = ln x + y (B) u(x,y) = ln x + ln y (C) u(x,y) = √xy (D) u(x,y) = min {x, y}
Demand theory and elasticity has come up 161 times in 7 exams since 2004.
What this question tests
This question is on Income elasticity, normal and inferior goods and Engel curves, part of Demand theory and elasticity in Microeconomics.
How demand responds to income, how goods are classified by that response, and Engel's law.
TestStop has 33 past-paper questions on this subtopic; the nearest in year are below.
Similar questions from other papers
- Goods are substitutes when an increase in price of one leads to _ of other commodity.
- Let e, R, and p represent own price elasticity of demand, total revenue, and price, respectively for a good. If (∂ R)/(∂ p)<0, then
- If the demand function is Q = 100 - 2P, when P = 25; then elasticity of demand will be:
- The decision by consumers to buy larger quantities of a good at each possible price can not be caused by
- The demand function is given as log Q = log A + 0.5log P, where Q is quantity, P is the unit price of the good and A is a positive real number. The own price elasticity…
Question from the DSE 2021 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.