For each pair of items below determine which product would have the higher price elasticity of demand (in absolute value)
a. Insulin for a diabetic or aspirin for someone suffering a headache.
b. A new Whirlpool 27 cu.ft. side-by-side refrigerator or electricity to power your all-electric home.
c. A can of Red Bull or soft drinks in general.
What will be an ideal response?
a. The demand for aspirin is more price elastic (its elasticity has a higher absolute value) than the demand for insulin. Insulin is more necessity than luxury and has virtually no substitutes. There are substitutes for aspirin and it is not necessarily a necessity.
b. The demand for a new refrigerator is more price elastic than the demand for electricity to power your home. The Whirlpool refrigerator has many substitutes. Electricity to power your all-electric home is more necessity than luxury, and if your home is powered only by electricity, few, if any, substitutes are available.
c. The demand for Red Bull is more price elastic than demand for soft drinks in general. Narrowly defined markets (such as the Red Bull drink market) have many substitutes.
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A price floor:
A. establishes a maximum price. B. establishes a minimum price. C. establishes a maximum quantity. D. establishes a minimum quantity.
Refer to Figure g. Lily's benefit function (dashed) is more concave than Millie's benefit function (dotted). Lily:
B. is less risk averse than Millie.
C. has a smaller risk premium than Millie.
D. has a larger certainty equivalent than Millie.
Suppose the CPI in 1950 was 24.1 and the CPI in 1975 was 53.8 . When Ken's income rose from $10,000 per year in 1950 to $20,000 per year in 1970, Ken's standard of living improved between 1950 and 1970
a. True b. False Indicate whether the statement is true or false
If the variable cost curve is a straight line, then the
A. marginal cost curve may be U-shaped. B. marginal cost curve is upward sloping. C. marginal cost curve will be U-shaped. D. marginal cost curve will be horizontal.