Suppose the value of the price elasticity of demand is -3. What does this mean?
A) A 1 percent increase in the price of the good causes quantity demanded to increase by 3 percent.
B) A 1 percent increase in the price of the good causes quantity demanded to decrease by 3 percent.
C) A 3 percent increase in the price of the good causes quantity demanded to decrease by 1 percent.
D) A $1 increase in price causes quantity demanded to fall by 3 units.
Answer: B
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Inflation that is caused by an increase in aggregate demand without any change in aggregate supply is called
A) demand-push inflation. B) cost-pull inflation. C) cost-push inflation. D) demand-pull inflation.
"Supply curves are upward sloping" is a graphical way of saying
a. supply equals demand b. price and quantity supplied are inversely related c. price and quantity demanded are directly related d. price and quantity supplied are directly related e. price and quantity demanded are inversely related
Each country in NAFTA sets its own tariffs to the rest of the world.
a. true b. false
Greg spends his entire budget on two goods: he plays video games at the mall arcade and he buys pizza. He discovers that his MU/P of video games is lower than his MU/P of pizza. From this, we know that he would be:
A. as happy as possible, since he is already maximizing total utility. B. happier eating less pizza and playing more video games. C. happier eating more pizza and playing fewer video games. D. indifferent to which selection he makes.