Suppose That the Market Demand Curve for Sunflowers Is a Function

question 36

Multiple Choice

Suppose that the market demand curve for sunflowers is a function of the price of sunflowers, the price of roses, and income. If the partial derivative of quantity demanded of sunflowers with respect to income is negative:

• A) sunflowers are normal goods.
• B) roses are normal goods.
• C) sunflowers are inferior goods.
• D) roses are inferior goods.

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Definitions:

Externalities

Economic side effects or consequences that affect uninvolved third parties; can be either positive or negative.

Social Costs

The total cost of an action or decision, including both private costs and any externalities borne by society at large.

Positive Externality

Positive Externality occurs when a transaction or activity benefits a third party not directly involved, like the societal benefit of education or vaccinations.

External Benefit

A benefit that an individual or firm confers on others without receiving compensation.