For most goods and services, income elasticity of demand tends to be smaller in the short run than in the long run. However, a recent study shows that the demand for a durable good such as automobiles tends to be more income-elastic in the short run than in the long run. Why?
What will be an ideal response?
Answer: Since durable goods are typically consumed over a relatively long period of time, consumers have a higher degree of flexibility to replace old goods with new ones. Demand for automobiles is a good example. Suppose that consumers' income falls due to a recession. Considering that the purchase of an automobile represents a large share of a consumer's budget, the consumer may put off the purchase of a new automobile till next year. In the long run, automobiles will eventually break down and new purchases will be made.
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All the production points that lie ________ the total product curve are attainable and ________
A) above; efficient B) above; inefficient C) below; efficient D) below; inefficient
The general form of the per-person production function used in Chapter 10 is
A) (Y/N) = A - f(N/K). B) (Y/N) = A + f(N/K). C) (Y/N) = A/f(K/N). D) (Y/N) = Af(K/N).
Since it is a centrally planned economy, China does not face opportunity costs when economic decisions are made
a. True b. False Indicate whether the statement is true or false
Quantity Supplied
What will be an ideal response?