The Expansion Path for a Homothetic Production Function

question 6

Multiple Choice

The expansion path for a homothetic production function:

• A)is a straight line through the origin with a slope greater than one if w > v.
• B)is a straight line through the origin with a slope less than one if w < v .
• C)is a straight line through the origin though its slope cannot be determined by w and v alone.
• D)has a positive slope but is not necessarily a straight line.

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Definitions:

Inferior Good

A type of good for which demand decreases when the income of consumers increases, inversely related to income changes.

Indifference Curves

Curves that represent the locus of various points indicating combinations of goods giving equal satisfaction and utility to the consumer.

Inferior Good

A category of product that sees reduced demand as the income levels of buyers rise.

Normal Good

A normal good is one for which demand increases as the income of consumers increases.