Answer the following questions true (T) or false (F)
1. Necessities tend to have more inelastic demand than luxuries.
2. When there are few substitutes available for a good, demand tends to be relatively inelastic.
3. If the market for a product is narrowly defined, then there are likely to be many substitutes for the product and the demand for the product is relatively elastic.
1. TRUE
2. TRUE
3. TRUE
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A law establishing a minimum legal price for a good or service (the minimum wage for example) is known as
a. an equilibrium price. b. a price floor. c. a price ceiling. d. a price wall.
An inferior good is one for which an increase in income causes a(n)
a. increase in supply b. decrease in supply c. increase in demand d. decrease in demand
During times of high unemployment, colleges often observe an increase in enrollment even if tuition remains unchanged. Why?
A. Students go to college even when the net benefit is negative. B. The opportunity cost of attending college is higher when unemployment is high. C. The benefit of attending college is lower because college graduates are less likely to find jobs. D. The opportunity cost of attending college is lower when unemployment is high.
If the Fed wants to limit the money supply, it should ______.
a. buy bonds b. decrease the interest rate paid on reserves c. raise the discount rate d. lower reserve requirements