If oranges sell for $100 per crate in the United States and 4000 pesos per crate in Mexico, the law of one price indicates that you should be able to exchange $1 for
A) 0.025 peso.
B) 4 pesos.
C) 40 pesos.
D) 400 pesos.
C
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What role does the price elasticity of demand play in markup pricing, i.e., how does it affect the firm's ability to mark up price over marginal cost?
What will be an ideal response?
Consider a large open economy that has a zero current account balance
What are the effects on the world real interest rate, national saving, investment, and the current account balance in equilibrium if (a) future income rises? (b) business taxes decline? (c) government purchases decline? (d) the future marginal product of capital declines?
If the demand for air travel were to change so that business travelers and vacationers have the same price elasticity of demand for air travel,
A) airlines would charge the same price to each type of flyer. B) airlines would still charge business flyers a higher fare since the traveler's employer pays anyway. C) airlines would be driven out of business. D) airlines would counter by charging vacationers a higher fare.
The demand curve is: QD = 500 - 1/2 P
a. Calculate the (point) price elasticity of demand when price is $100. Is demand elastic or inelastic? b. Calculate the (point) price elasticity of demand when price is $700. Is demand elastic or inelastic? c. Find the point at which point elasticity is equal to -1.