Which of the following statements correctly identifies the difference between the cross-price elasticity of demand and the income elasticity of demand?
A) The income elasticity of demand can take only positive values, whereas the cross-price elasticity of demand can take both positive and negative values.
B) The cross-price elasticity of demand can take only negative values, whereas the income-elasticity of demand can take both positive and negative values.
C) The income elasticity of demand for a good is independent of the price changes of related goods, whereas the cross-price elasticity of demand for a good is independent of the income changes of the consumer.
D) The income elasticity of demand for a good is zero for normal goods, whereas the cross-price elasticity of demand for a good is always positive for normal goods.
C
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Traffic congestion is an example of a negative externality because
A) motorists take into account all benefits while driving. B) motorists take into account all costs while driving. C) a motorist's cost of driving spills over and affects other motorists. D) a motorist's benefit from driving spills over and affects other motorists.
________ increases households' saving
A) A decrease in the real interest rate B) A tax cut that increases disposable income C) Higher expected future income D) A stock market boom that increases the purchasing power of households' wealth
Data on education and earnings reveal:
A. negative age-earnings profiles for male workers. B. no relationship between the two. C. a positive relationship between the two. D. a negative relationship between the two.
At full employment the unemployment rate equals the:
A. cyclical unemployment rate. B. structural unemployment rate. C. structural unemployment rate plus the cyclical unemployment rate. D. structural unemployment rate plus the frictional unemployment rate.