If an increase in the price of good X leads to a decrease in the demand for good Y, then:
A. good X is a normal good and good Y is an inferior good.
B. good X and good Y are normal goods.
C. good X and good Y are substitutes.
D. good X and good Y are complements.
Answer: D
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The demand for insulin is quite inelastic. The demand for Pepsi is quite elastic. Suppose the elasticity of supply for insulin is the same as the elasticity of supply for Pepsi
If a $0.20 tax was imposed on each of these goods (holding everything else constant), which consumers would pay more of the tax? A) the Pepsi consumers B) the insulin consumers C) There would be no difference in the amount of tax paid by the consumers. D) More information is needed to determine which consumers pay more of the tax. E) The premise of the question is wrong because the elasticity of demand and the incidence of a tax are not related.
Assume that foreign capital flows into a nation rise due to expected increases in stock market appreciation. If the nation has highly mobile international capital markets and a fixed exchange rate system, what happens to the real risk-free interest rate and current international transactions balance in the context of the Three-Sector-Model? a. The real risk-free interest rate falls and current
international transactions balance becomes more negative (or less positive). b. The real risk-free interest rate rises and current international transactions balance becomes more negative (or less positive). c. The real risk-free interest rate and current international transactions balance remain the same. d. The real risk-free interest rate rises and current international transactions balance remains the same. e. There is not enough information to determine what happens to these two macroeconomic variables.
Many economists suggest that absent legal mechanisms of discrimination, the wage paid to men and women will converge because
A. employers will feel guilty about paying men more when other firms pay equally. B. employers will feel guilty about hiring only men. C. it will be in the interest of profit-minded employers to hire women, thus bidding up their wages. D. if employers can hire men and women at the same wage, they will hire equal numbers.
Creative destruction is:
A. the process by which large firms buy up small firms. B. the process by which new firms and new products replace existing dominant firms and products. C. a term coined many years ago by Adam Smith. D. applicable to planned economies but not to market economies.