The above figure shows a consumer's indifference curves for soda and all other goods. Assuming a budget of $100, derive the consumer's demand for soda for prices of $4 and $10 per case of soda. Estimate the price elasticity of demand for soda
What will be an ideal response?
At a price of $4, 15 cases are purchased, At a price of $10, 6 cases are purchased. In both cases, the same total amount, $60, is spent on soda. This implies unit elasticity.
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A free rider
A) benefits from a positive externality without paying for it. B) has a horizontal demand curve. C) places no value on the good provided. D) All of the above.
Which of the following describes the correct relationship among the nominal interest rate, the real interest rate, and the inflation rate?
a. Real interest rate = nominal interest rate + inflation rate b. Real interest rate = nominal interest rate - inflation rate c. Nominal interest rate = real interest rate - inflation rate d. Inflation rate = real interest rate - nominal interest rate e. Inflation rate = nominal interest rate + real interest rate
Which is not a characteristic of a good economic model?
A. Describes the world accurately B. Focuses on important details C. Predicts cause and effect D. Utilizes vague assumptions
Financial innovation has caused
A) banks to suffer declines in their cost advantages in acquiring funds, although it has not caused a decline in income advantages. B) banks to suffer a simultaneous decline of cost and income advantages. C) banks to suffer declines in their income advantages in acquiring funds, although it has not caused a decline in cost advantages. D) banks to achieve competitive advantages in both costs and income.