Are the following statements true or false? A simple yes-no answer will not suffice. Explain, with the use of diagrams where necessary.
1. The utility function u(a, b) = aâ0.2 b0.8 violates the non-satiation assumption.
2. If a consumer is a net borrower, an increase in the interest rate must reduce his borrowing, if consumption in each date is a normal good.
3. If a good has income elasticity less than one, it is inferior.
4. If the demand curve for good A is everywhere flatter than that of good B, then good A has a higher price elasticity of demand.
5. If a given set of consumer preferences are transitive, then there must be an infinite number of indifference curves describing those preferences.
6. If there are two goods, A and B, and A is Giffen, then B must be a price-substitute for A.
Please answer all 6 true/false questions and explain your asnwer. Use diagrams when necessary to explain your answer.
Are the following statements true or false? A simple yes-no answer will not suffice. Explain, with the use of diagrams where necessary.
1. The utility function u(a, b) = aâ0.2 b0.8 violates the non-satiation assumption.
2. If a consumer is a net borrower, an increase in the interest rate must reduce his borrowing, if consumption in each date is a normal good.
3. If a good has income elasticity less than one, it is inferior.
4. If the demand curve for good A is everywhere flatter than that of good B, then good A has a higher price elasticity of demand.
5. If a given set of consumer preferences are transitive, then there must be an infinite number of indifference curves describing those preferences.
6. If there are two goods, A and B, and A is Giffen, then B must be a price-substitute for A.
Please answer all 6 true/false questions and explain your asnwer. Use diagrams when necessary to explain your answer.
