Can you think of an example of a good whose demand could be perfectly inelastic?
What will be an ideal response?
For a good to have a perfectly inelastic demand, the quantity demanded must not change at all if the price increases or decreases. Medications could be good examples of goods whose demand might be perfectly inelastic. For example, if a diabetic takes a certain dosage of insulin each day, he or she is not going to take more insulin if it is cheaper (that would make him or her very ill), nor would he or she take less if the price went up (again, the result would be becoming ill).
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A currency drain is
A) when the Fed buys securities, but it is not when the Fed sells securities. B) when the Fed raises the required reserve ratio. C) an increase in currency held outside banks. D) when the Fed either buys or sells securities. E) when the Fed sells securities, but it is not when the Fed buys securities.
Assume that there are no excess reserves in the banking system when the reserve requirement is 20%. The purchase of $10,000 in U.S. government securities by the Fed from Academy National Bank has the potential to ultimately increase the money supply by: a. $2,000
b. $8,000. c. $10,000. d. $20,000. e. $50,000.
When per capita real GDP is increasing, real output is growing
a. more rapidly than prices. b. more rapidly than population. c. less rapidly than prices. d. less rapidly than population.
Refer to the above figure. Profits for this firm are
A. negative. B. zero. C. positive. D. undetermined without more information.