Suppose that Jane enjoys Diet Coke so much that she consumes one can every day. Although she enjoys gourmet cheese, she consumes it sporadically. If the price of Diet Coke rises, Jane decreases her consumption by only a very small amount. But if the price of gourmet cheese rises, Jane decreases her consumption by a lot. These examples illustrate the importance of
a. the availability of close substitutes in determining the price elasticity of demand.
b. a necessity versus a luxury in determining the price elasticity of demand.
c. the definition of a market in determining the price elasticity of demand.
d. the time horizon in determining the price elasticity of demand.
b
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An example of stimulus spending by the government might be:
A. increase in government purchases of new cars. B. the monthly payments a government agency makes to its employees. C. a cut in the government budget aimed at spurring private consumption. D. the FED engaging in open market sales of securities.
Suppose it is observed that the equilibrium wage and employment level have both risen in a competitive labor market. One can infer that the:
A. supply of labor has decreased. B. demand for labor has decreased. C. demand for labor has increased. D. supply of labor has increased.
In the long run a monopolistically competitive firm:
A. earns an economic profit. B. produces where P = ATC. C. produces where MR exceeds MC. D. achieves allocative efficiency.
An example of a good that is nonexcludable is:
A. an art exhibition with an admission fee. B. a piece of Velcro. C. space exploration. D. a bottle of Tang.