The income elasticity of demand for store brands of soda (that is, non-name brands) is negative. What does this fact indicate about consumers' perceptions about the store brands?
What will be an ideal response?
The negative income elasticity indicates that the store brands of soda are considered by many consumers to be an inferior good. Hence as income increases, consumption of these sodas decreases as consumers opt for name sodas, such as Pepsi and Coke.
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In the classical model,
a. markets do not automatically clear. b. business demand for loanable fund exceeds business planned investment spending. c. business demand for loanable fund is equal to business planned investment spending. d. businesses engage in interest-free borrowing. e. the government's demand for funds is downward sloping.
The market mechanism:
a) Works through central planning by the government. b) Is very inefficient since consumers cannot communicate directly with producers. c) Uses prices as a means of communication between consumers and producers. d) Eliminates market failures created by the government.
Which of the following is TRUE with respect to specialization?
A. Individuals and nations specialize in their areas of comparative advantage in order to reap the gains of specialization. B. With a given set of resources, specialization results in higher output. C. Adam Smith in The Wealth of Nations referred to specialization and division of labor. D. All of these are correct.
Suppose when the price of laptops fall, college students buy more laptops. This implies that
A) there is a one-to-one relationship between laptop prices and quantities purchased by college students. B) there is a direct relationship between laptop prices and quantities purchased by college students. C) there is a negative relationship between laptop prices and quantities purchased by college students. D) there is a positive relationship between laptop prices and quantities purchased by college students.