According to _______________, if you suddenly inherited a large sum of money, you would spend only a small part of your inheritance right away.
A. the paradox of thrift
B. the permanent income hypothesis
C. Thorstein Veblen's Theory of the Leisure Class
D. the theory of the multiplier
B. the permanent income hypothesis
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Suppose the demand curve for bus travel is downward sloping, and the income elasticity of demand for bus travel is negative.
(i) Design an indifference curve-budget line diagram showing the substitution and income effects created when the price of bus travel falls. In your diagram, place bus travel on the horizontal axis and all other goods on the vertical axis. (ii) How you can tell from your diagram that the income elasticity of demand for bus travel is negative? Explain.
Increases in both labor and capital productivity will result in:
A) downward shift of the average and marginal product curves and upward shift of the average cost curves. B) downward shift of the average and marginal product curves and downward shift of the average cost curves. C) upward shift of the average and marginal product curves and downward shift of the average cost curves. D) upward shift of the average and marginal product curves and upward shift of the average cost curves.
In arriving at the quantity of output and price of its product, a company
A. chooses either output or price, and consumer demand determines the other. B. has no control over either quantity or price. C. makes two decisions by setting both optimal output and optimal price. D. generally leaves both quantity and price decisions to consumers.
The central question in economics is how to
a. make the best use of scarce resources. b. use government planning agencies. c. induce people to want less. d. increase human knowledge.