As the price of milk increases, what happens at the original equilibrium in the market for cereal that signals market participants that the original equilibrium must change? (Milk and cereal are complements.)
A) A surplus is created by an increase in supply.
B) A surplus is created by a decrease in demand.
C) A shortage is created by an increase in demand.
D) A shortage is created by a decrease in supply.
B
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The value of the absolute price elasticity of demand for good X is 4. The absolute price elasticity for good Y is 1. Which good's quantity demanded is more responsive to a change in price?
A) Good X B) Good Y C) They are equally responsive. D) Not enough information is given.
Which of the following could explain a fall over time in the price of the depletable resource aloe?
a. The productivity of aloe mines fell. b. New deposits of aloe were discovered. c. Demand for aloe increased over time. d. All of the above are correct.
Currently, the strategy of the Social Security system is to run surpluses to prepare for the retirement of the baby boom generation. The effectiveness of this strategy is being undermined because
a. rising interest rates make it more expensive for Social Security to borrow. b. inflation is reducing the value of the Social Security surplus. c. the trust fund is being used to finance current government expenditures, and the bonds held by the trust fund are an obligation of the U.S. Treasury. d. the federal budget surplus reduces the Social Security surplus.
In constructing models, economists
A. make simplifying assumptions. B. consider all factors that can change. C. include all available information. D. attempt to duplicate the real world.