Holding fixed his income and the price of food

Reference no: EM13847399

1. Mr. A spends all his income on food and housing. Holding fixed his income and the price of food, Mr. A spends more on food as housing becomes more expensive. How many of the following statements can we infer from this information alone?

(1) Holding all else fixed, he spends more on housing as the price of housing goes up.

(2) Holding all else fixed, he purchases less housing as the price of housing goes up.

(3) Housing is a normal good for Mr. A.

(4) As the price of housing goes up (holding all else fixed), the change in Mr T's demand for housing due to the substitution effect is nonpositive.

2. Ms. J spends all her income on food and housing. Holding fixed her income and the price of food, Ms. J purchases less of both food and housing when housing becomes more expensive. How many of the following statements can we infer from this information alone?

      (1) Holding all else fixed, her spending on housing increases as it becomes more expensive.
      (2) Food is an inferior good for Ms. J.
      (3) Housing is a normal good for Ms. J.
      (4) As the price of housing increases (holding all else fixed), the change in Ms J's demand for housing due to the income effect is nonpositive.

3. Ms. H spends all her income on food and housing. Holding fixed her income and the price of food, a change in the price of housing does not affect Ms. H's demand for food. How many of the following statements can be inferred from this information alone?

      (1) Holding all else fixed, her spending on food decreases as the price of housing goes up.
      (2) Holding all else fixed, her spending on housing decreases as the price of housing goes up.
      (3) Housing is a normal good for Ms. H.
      (4) Law of demand holds for housing.

Reference no: EM13847399

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