Which of the statements below about the income elasticity of demand are true? For normal goods, income elasticity is positive. For inferior goods, income elasticity is negative. When income elasticity for a good is greater than one, the share of income spent on the good is higher with higher income.

The first seven questions are about the market for bagels. For each of the following situations, determine what happens to the equilibrium quantity (QBagels) and equilibrium price (PBagels) of bagels.

University of Minnesota students love grabbing a bagel on their way to ECON 1101 class and the number of students first-year students attending UMN has increased this year. 

A new kind of consumption good, the “smidget” is invented in Econland. Suppose that the impact of the invention on the widget market is that the price Pwidget decreases while the quantity Qwidget remains unchanged. A possible explanation for why this happened is that widgets and smidgets are __________ and the supply curve for widgets is __________. (Fill in the blanks.)

Two things happen: (1) the price of eggs (an input in the production of bagels) increases and (2) income increases in the economy (assume bagels are a normal good).

Suppose that Alya’s income increases to $32, while the prices of nachos and tacos remain unchanged. Relative to the initial optimal consumption bundle, what is the change in Alya’s quantity demanded for tacos associated with the increase in income?

Name Willingness to pay Kiara 20 Elena 18 Maya 15 Isabella 13     The willingness to pay for fireworks in Econland is given in the table above. Assume the fireworks is non-rivalrous in consumption and non-excludable. It is socially efficient to have the fireworks if and only if the cost is no higher than

Suppose that the price of one taco falls from $8 to $2 and that both Alya’s income and the price of one nacho remain unchanged at $16 and $2, respectively. What happens to Alya’s quantity demanded for tacos as a result of the decrease in the price of tacos?

The long-run equilibrium price PLR is

The above graph illustrates the supply and demand for widgets in Econland, where instead Widgets can be obtained in world markets at a price PWorld = R as illustrated.  Suppose initially Econland is in autarky.  Then it opens to free trade with the rest of the world. Use this information to answer questions 11 – 15.