If the cross price elasticity of demand for tacos with respect to burritos equals +2.5, then:
a. a 1% increase in the quantity of burritos purchased will lead to a 2.5% increase in the price of a taco
b. a 10% increase in the price of a burrito will lead to a 25% increase in the quantity of tacos demanded at a given price.
c. a 1% decrease in the price of a burrito will lead to a 2.5% increase in the quantity of tacos demanded at a given price.
d. a 1% increase in the quantity of tacos purchased will lead to a 2.5% increase in the price of a burrito.
b
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The compensation variation and equivalent variation will be closer to each other when
A) the income elasticity is greater. B) the budget share is greater. C) the price change is smaller. D) the income elasticity is smaller.
The use of real options in capital budgeting
A) may raise the NPV of a capital project. B) makes the analysis of the project considerably easier. C) allows management to make decisions more quickly. D) eliminates the need for calculating the project's risk adjusted discount rate.
If the demand for a good is relatively inelastic, this means that consumer purchases of the good are
a. not very sensitive to the price of the good. b. highly sensitive to the price of the good. c. unrelated to the price of the good. d. unaffected by changes in the income level of consumers.
If interest rates fall,
A. the demand curve for loans will shift out. B. the discounted value now of money to be received in the future will fall. C. some previously unprofitable prospective investments will become profitable. D. the supply curve for loanable funds will shift in.