Q. 1. (T, F, U) In response to a new pollution regulation, the price of gasoline goes up also the government must compensate consumers $200 to avoid a loss in their utility. This is the same amount that consumers would have been willing to pay to avoid the price change in the 1st place.

2. (T, F, U) Consider an economy with only 2 goods, beans also rice. If the price of both double then compensated demand for each good will fall by an equal amount.

3. (T, F, U) If income elasticities are equal for all goods, then all Mashallian demand functions must be downward sloping.