Suppose that the price elasticity of demand for mittens is –2.5 . What would happen to the quantity of mittens demanded if the price of mittens rose from $5 to $6? Use the midpoint formula in your calculations
What will be an ideal response?
percentage change in price = [6 – 5]/[5.5] = 1/5.5 = 18.2
[percentage change in quantity demanded]/[18.2] = -2.5
Therefore, the quantity of mittens demanded will fall by 45.5 percent.
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Jake opens a pig farm in Idaho. To start his farm, he uses his entire $50,000 of savings from his savings account. The bank was paying him $2,500 interest on his saving. Explain why the $2,500 is one of Jake's costs
What will be an ideal response?
The Federal Reserve System has the power to: a. raise or lower federal income tax rates
b. balance the federal government budget. c. increase or decrease federal government spending. d. compete with commercial banks in making loans to business firms. e. buy and sell federal government securities.
The reason that velocity increases when interest rates rise is
a. the Fed encourages banks to turn money in faster for recycling, which causes money to move faster. b. the opportunity cost of saving increases, so people hold smaller cash balances. c. home mortgage payments increase, so people write larger checks that reduces their checking account balances. d. the opportunity cost of holding money increases, so average money balances decrease.
Which of the following would shift the short-run aggregate supply curve to the right?
A. A reduction in the minimum wage B. An increase in oil prices C. A change in the law requiring overtime pay for anyone working more than 30 hours a week D. An increase in payroll taxes