1. Tom Brady gets $200 per week as allowance. Irrespective of what the price of comic books is, he spends exactly $100 on comic books every week. Taking absolute values, Tom’s elasticity of demand for comic books is
A. always greater than one but less than infinity.
B. always one.
C. always zero.
D. always infinite.
E. impossible to determine from the information given.
2. Suppose Jerry tells us his preference over 3 bundles, B1, B2 and B3. Sizing them up, Jerry claims that B1 is at least as good as B2, and that B2 is at least as good as B3, and that B1 is better than B3.
This tells us that Jerry’s preferences
A. must be for goods that are perfect substitutes.
B. are transitive.
C. do not satisfy the principle that more is better.
D. do not satisfy the principle that average bundles are at least as good as extremes.
E. will give rise to indifference curves that slope upward.