CFA Practice Question

There are 539 practice questions for this study session.

CFA Practice Question

Even though Mary's income is very low, she makes sure that she purchases enough milk for her family to drink. As her income rises, she buys more milk. Which graph best represents Mary's Engel curve for milk?

A. B
B. C
C. D
Explanation: Note that C indicates that even if her income is very low (zero) she still buys "enough" milk.

User Contributed Comments 7

User Comment
geofin Well, simple logic says that if her income is zero, she cannot buy ANY milk! Very low income means she still has some (i.e. it is not precisely zero). Therefore, the most correct answer should be B.
gill15 I dont get that either. I guess she steals. If they said even at no income she buys milk I would've went with the other one....
robertucla Another reason why economics does not work in real life.
jejasin I figured it would be picture C, but still chose picture B because it makes more logical sense....
farhan92 yep C makes no sense with info given and can't see how it would make sense. I guess its the illuminati wanting us to fail
ascruggs92 It's a representation guys, don't think too hard about it. The question makes it clear that she's buying milk even if she has low income, so to make you all happy, think of the X-Y intercept as minimum wage, not zero income. Graph C shows that she is buying milk even at the lowest possible income level, and increases quantity purchased as her wages increase.

On the flip-side, Graph B shows her buying milk only once she achieves a certain level of income. Regardless of everything that seems incorrect about Graph C, the answer cannot be Graph B because the question makes it clear that, as long as she's making money, she's buying milk.
nmech1984 ascruggs92, well said but making many assumptions in order to answer the question, it just changes the nature and credibility of the test
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