Indy has a price elasticity of demand for beer of 1.00. Suppose the price of each beer is increased by 10 percent. What will happen to the total amount Indy spends on beer?
A. It will decrease 10 percent.
B. It will not change.
C. It will increase 10 percent.
D. It is impossible to tell.
Answer: B
You might also like to view...
If the Federal Reserve raises the discount rate, banks will be inclined to borrow additional reserves and the money supply will increase
Indicate whether the statement is true or false
A monopolist is the sole supplier of a good or service for which there are no close substitutes
Indicate whether the statement is true or false
One million automobiles have a defect that could cause the car to explode; however, only one of those cars will actually explode. Nobody knows which one car it is
When the car does explode, the victim's family will sue the automaker for $1 million and win. The defect costs $2 per car to repair. What does economics predict about the automaker's decision to repair the defect?
Farmer Fred could grow wheat and barley. He could grow 75 bushels of wheat or 125 bushels of barley using the same resources on an acre of his land. The price of wheat is $2.00 per bushel and the price of barley $ 0.80 . Show the benefits to Fred from specialization. What should he specialize in?