Why do necessities tend to have demand that is price inelastic, while luxuries tend to have demand that is price elastic?
What will be an ideal response?
ANS:
Necessities, such as milk for children and electricity for our homes, are hard to do without. Therefore, when their price increases, we do not tend to reduce our purchases of these commodities very much. On the other hand, a luxury, such as a fur coat or diamond necklace, is not essential and has available substitutes. Therefore, we find it much easier to reduce or eliminate our purchase of such items.
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A nonprice determinant of supply refers to something that:
A. affects the price other than supply. B. affects supply other than the price. C. determines how large a role prices play in the supply decision. D. determines how prices are affected by the seller's income.
It is difficult for economists to make observations and develop theories, but it is easy for economists to run experiments to generate data to test their theories
a. True b. False Indicate whether the statement is true or false
The lag in realizing that a macroeconomic problem exists is called
A) the recognition lag. B) the implementation lag. C) the impact lag. D) the market lag.
Technically the elasticity number is negative because
A. When price falls quantity demanded will rise, but for simplicity economists take the absolute value of the elasticity number. B. When price rises quantity demanded will rise, but for simplicity economists take the absolute value of the elasticity number. C. The demand curve is upward-sloping. D. When price falls quantity demanded will fall, but for simplicity economists take the absolute value of the elasticity number.