Economics Homework Three Answers - Student Nine

Economics Homework #3

Mark B.

1. Luxury goods have a high price elasticity. An example of a luxury good that would have a high price is a Rolls Royce car.

I think meant, "An example of a luxury good that would have a high price elasticity is a Rolls Royce car." Full credit.

2. Income elasticity is a term used for describing the relationship between the income of people and the demand of a good.

Close, but need to emphasize that it is the relationship between the change in the income of people and the change in the demand of a good. (Minus 1).

3. A nearly perfectly elastic demand curve is nearly flat. A nearly perfectly inelastic demand curve is nearly vertical.

Superb, may use as a model.

4. The name necessity is given to a good that has price elasticity of less than 1 because if the seller increases the price he will not lose revenue.

Correct statement about "price elasticity," but see the model answers. Also, the question further asked about a "luxury". (Minus 1).

5. A substitute for French fries is onion rings, and a complement for them is ketchup.

Superb.

6. A normal good is a new car; an inferior good is a used car.

Excellent, could explain a bit why that is true. Full credit.

7. There is a shortage, because fewer people want to supply the product at a low price, and more people are willing to buy it.

Superb.

Very good work. 68/70.--Andy Schlafly 15:00, 27 September 2009 (EDT)