When Her Income Increased from $10,000 to $20,000, Heather's Consumption

question 23

Multiple Choice

When her income increased from $10,000 to $20,000, Heather's consumption of macaroni decreased from 10 pounds to 5 pounds and her consumption of soy-burgers increased from 2 pounds to 4 pounds. Using the midpoint method, we can conclude that for Heather, macaroni

• A)and soy-burgers are both normal goods with income elasticities equal to 1.
• B)is an inferior good and soy-burgers are normal goods; both have income elasticities of 1.
• C)is an inferior good with an income elasticity of -1 and soy-burgers are normal goods with an income elasticity of 1.
• D)and soy-burgers are both inferior goods with income elasticities equal to -1.

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Definitions:

Marginal Tax Rate

The rate at which the last dollar of a taxpayer’s income is taxed, indicating the proportion of additional income that is paid in taxes.

Proportional Tax

A tax system where the tax rate remains constant regardless of the amount subject to taxation.

Regressive Tax

A tax system wherein the tax rate decreases as the taxable amount increases, placing a higher burden on lower-income earners.

Sales Tax

A tax on the value of goods sold.