Adam and Barb go to the store to purchase some lottery tickets. Without looking at the price, Adam says "I'll take 10 lottery tickets," and Barb says "I'll take $10 worth of lottery tickets.". What is each person's price elasticity of demand for lottery tickets?
Since Adam wants 10 tickets regardless of the price, his demand curve is vertical, which is perfectly inelastic. Therefore, Adam's price elasticity of demand is zero.
Barb's price elasticity of demand is unit elastic, or 1.0.
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When the economy enters an expansion of a business cycle, households become more optimistic about expected future disposable income. The increase in optimism leads to
A) a shift upward of the consumption function. B) a movement downward along the consumption function. C) no change in the level of consumption expenditures. D) an increase in consumption expenditures. E) a movement upward along the consumption function.
The response in quantity demanded to a price increase in subway rides:
A. will be more elastic in six weeks than in six months. B. will be less elastic in six weeks than in six months. C. will be the same over that time period. D. is unpredictable without more information.
Which of the following best exemplifies a firm with a zero economic profit?
a. A hair salon that is making a small profit after expenses, but whose owners feel they could make more money by closing the business and getting different jobs. b. A bike shop that makes enough of a profit that its owners feel it is worth the time and money they put into the business. c. A cleaning service that is just getting started and does not yet have enough customers to cover the firm’s expenses. d. A popular restaurant with revenues that greatly exceed expenses and whose owners are planning to expand into a chain.
If an individual perfectly competitive firm charges a price above the industry equilibrium price, it will
A. sell part of what it can produce and gain less revenue than competitors will. B. not sell any of what it produces. C. sell all that it can produce and gain equal revenue with competitors. D. sell all that it can produce and gain more revenue than competitors.