Economics I (49.201) Answers to Problem Set 5 Multiple Choice 1A13B 2D14B 3A15A 4D16B 5A17C 6A18B 7B19A 8D20C 9B21A 10A22D 11B23D 12A True/False 24T33T 25T34F 26T35T 27F36F 28T37F 29F38T 30T39T 31F40F 32F
Short Answer 41. a.Diamonds are luxuries, and water is a necessity. Therefore, diamonds have the more elastic demand. b.Insulin has no close substitutes, but decongestant spray does. Therefore, nasal decongestant spray has the more elastic demand. c.Breakfast cereal has more substitutes than does food in general. Therefore, breakfast cereal has the more elastic demand. d.The longer the time period, the more elastic demand is. Therefore, gasoline over the course of a year has the more elastic demand. e.There are more substitutes for IBM personal computers than there are for personal computers. Therefore, IBM personal computers have the more elastic demand. 42. The income elasticity of demand for the Shaffers is 2. Normal good. 43. 1.33. Substitutes.