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Questions and Answers

Which of the following is true about comparative statics analysis of ordinary demand functions?

  • It studies how ordinary demands change as prices change
  • It studies how ordinary demands change as prices and income change (correct)
  • It studies how ordinary demands change as income changes
  • It studies how ordinary demands change as prices and income change, holding other factors constant

What is the focus of own-price changes in demand analysis?

  • How one demand changes as income changes
  • How one demand changes as prices and income change
  • How one demand changes as the price of another good changes
  • How one demand changes as its own price changes, holding other factors constant (correct)

In the equation p1x1 + p2x2 = y, what does p1 represent?

  • The quantity of good 2
  • The price of good 2
  • The quantity of good 1
  • The price of good 1 (correct)

What happens to x1* as p1 increases, holding p2 and y constant?

<p>x1* decreases (D)</p> Signup and view all the answers

What happens to x1* as p1 changes from p1' to p1'' to p1''', holding p2 and y constant?

<p>x1* remains constant (C)</p> Signup and view all the answers

What is the purpose of comparative statics analysis of ordinary demand functions?

<p>To study how ordinary demands change as prices and income change, while holding other factors constant (A)</p> Signup and view all the answers

What does the equation p1x1 + p2x2 = y represent?

<p>The relationship between prices and quantities demanded (B)</p> Signup and view all the answers

What happens to x1* as p1 increases, holding p2 and y constant?

<p>x1* increases (B)</p> Signup and view all the answers

What happens to x1* as p1 changes from p1' to p1'' to p1''', holding p2 and y constant?

<p>x1* decreases from p1' to p1'' and then increases from p1'' to p1''' (A)</p> Signup and view all the answers

What happens to x2 as p1 changes from p1' to p1'' to p1''', holding p2 and y constant?

<p>x2 increases from p1' to p1'' and then decreases from p1'' to p1''' (D)</p> Signup and view all the answers

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