Suppose the equilibrium price in the market is $200 and the marginal revenue associated with the linear (inverse) demand function is ?$200. Then we know that the own price elasticity of demand is:
A. ?1.
B. ?0.5.
C. 2.
D. It cannot be determined from the information contained in the question.
Answer: B
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Government expenditures are considered autonomous in the model meaning that changes are the result of:
A) changes in real income. B) changes in inflation. C) changes in unemployment. D) changes in policy decisions.
Suppose two goods are perfect substitutes. The price elasticity of demand of one of the goods is
A) 0. B) 1. C) 1000. D) infinity.
If we were to compare the hourly earnings of union and nonunion workers in recent years, we would find that
A) unions have not succeeded in raising the hourly incomes of their members above nonunion members. B) unions have succeeded in raising the hourly incomes of their members above nonunion members. C) state government unionized employees have earned less in hourly wages than nonunion government employee. D) union members have increased their hourly incomes, but are still below the hourly incomes of nonunion members.
What is the difference between the cross-elasticity of demand for two goods which are substitutes and two goods which are complements?