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Questions › JNU › JNU SIS 2013 › Q1
4 marks, −1Microeconomics › Demand theory and elasticity › Income elasticity, normal and inferior goods and Engel curvesModerateabout 2 min

JNU SIS 2013 Question 1: Demand theory and elasticity

Kiran's utility function is U(x1; x2)=2ln⁡(x1)+x2U(x_1;\ x_2) = 2\ln(x_1) + x_2U(x1​; x2​)=2ln(x1​)+x2​. Given her current income and the current relative prices, she consumes 10 units of x1x_1x1​ and 15 units of x2x_2x2​. If her income doubles, while prices stay constant, how many units of x1x_1x1​ will she consume after the change in income?

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Plain-text version

Kiran's utility function is U(x₁; x₂) = 2ln (x₁) + x₂. Given her current income and the current relative prices, she consumes 10 units of x₁ and 15 units of x₂. If her income doubles, while prices stay constant, how many units of x₁ will she consume after the change in income? (A) 20 (B) 5 (C) 10 (D) The information given is not enough to determine

Also written as: Kiran's utility function is U(x_1; x_2) = 2ln (x_1) + x_2. Given her current income and the current relative prices, she consumes 10 units of x_1 and 15 units of x_2. If her income doubles, while prices stay constant, how many units of x_1 will she consume after the change in income?

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.

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Practise Demand theory and elasticityMore on Income elasticity, normal and inferior goods and Engel curves

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