1)

Lobster is a normal good.

Hot dogs is inferior good.

For a normal good, the relationship between income and the demand for the good is positively correlated. This means consumers will purchase more normal goods when they have more money. The income elasticity of demand for lobster is positive (1.25), thus, lobster is a normal good.

For an inferior good, the income elasticity of demand is negative because when income is higher, people will consume inferior goods less. Hot dogs is inferior good because the income elasticity of demand for hot dogs is negative (-1.25).

2)

• The above statement is false.

Economist refers to people who have an understanding of different economic concepts. Business owners are people who own specific businesses within society. Knowing economic ideas for business owners is essential since it helps them make better decisions. Economic concepts mainly help people to make better decisions. Thus, if a business owner understands different economic ideas, he or she can use the knowledge to make more informed decisions. The above is wrong when it argues that a business owner does not need to understand economic concepts. For example, if a business owner understands the elasticity of demand, he will predict the expected demand depending on the current economic status. Therefore, he will fill his stores with the appropriate number of products.

3)

False

This is false because if the demand is elastic, an increase in price will create a decrease in the total revenue.

This is true only for the inelastic demand.

Therefore the statement is false.