An elasticity of 1.5 means that a 1% change in price will lead to a ____% change in quantity demanded.
A. 0.5
B. 1.0
C. 1.5
D. 3.0
C. 1.5
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In economics we assume that the goal of a firm is to
A) minimize costs. B) maximize revenue. C) maximize economic profits. D) maximize total sales.
If the price of steel increases drastically, the quantity of steel demanded by the building industry will fall significantly over the long run because
A) buyers of steel are more sensitive to a price change if they have more time to adjust to the price change. B) buyers of steel are less sensitive to a price change if they have more time to adjust to the price change. C) sales revenue in the building industry will fall sharply. D) profits will fall by a greater amount in the long run than in the short run.
State and local governments are limited in their ability to respond to recessions because of:
A. Local politics and politicians B. Their desire to always run budget surpluses C. The lack of proper economic research and assistance D. Constitutional and other requirements to balance their budgets
Substitution bias in the CPI refers to the fact that the CPI
A) takes into account the substitution of goods by consumers when relative prices change. B) takes no account of the substitution of goods by consumers when relative prices change. C) substitutes quality changes whenever they occur without taking account of the cost of the quality changes. D) substitutes relative prices for absolute prices of goods.