Price elasticity of demand is the responsiveness of
A) the quantity demanded to a change in price.
B) demand to a change in supply.
C) demand to a change in income.
D) demand for a good to a change in the demand for another good.
Answer: A) the quantity demanded to a change in price.
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The opportunity cost of a hot dog in terms of hamburgers is the
A) ratio of the slope of the demand curve for hot dogs to the slope of the demand curve for hamburgers. B) ratio of the slope of the supply curve for hot dogs to the slope of the supply curve for hamburgers. C) money price of a hot dog minus the money price of a hamburger. D) ratio of the money price of a hot dog to the money price of a hamburger.
The "mode" household income is
A) the income that separates households into two equal groups. B) the most common level of household income. C) the mean household income. D) the average household income.
Julia knows that the price elasticity of movie rentals is 3. She knows, therefore, that if she raises her price from $2 to $2.50, her rentals will drop by approximately
A. 150 percent. B. 100 percent. C. 75 percent. D. 33 percent.
Use the intertemporal budget constraint — equation (2 ) — to explain how an increase in the real interest rate causes two distinct effects, an income effect and a substitution effect,
and how those effects differ depending on whether the consumer is a saver or a borrower.