You explain to your roommate Surya, who makes beaded headbands, about an economic theory which asserts that consumers will purchase more of a product at lower prices than they will at higher prices
She contends that the theory is incorrect because over the past two years she has lowered the price of her headbands and yet has seen a decrease in sales. How would you respond to Surya?
A) I will explain to her that she is making the error of reverse causality: it is the decrease in demand that has caused her to lower her prices.
B) Surya is right; she has evidence to back her claim. The theory must be erroneous.
C) Surya is making the mistake of assuming that correlation implies causation.
D) I will explain to her that there are some omitted variables that have contributed to a decrease in her sales such as changes in income.
D
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Which of the following is an example of inelastic demand?
a. A 10 percent increase in the price of milk leads to a 20 percent decrease in the quantity demanded of milk. b. A 10 percent increase in the price of milk leads to a 10 percent decrease in the quantity demanded of milk. c. A 10 percent increase in the price of milk leads to a 5 percent decrease in the quantity demanded of milk. d. A 10 percent increase in the price of milk leads to a 10 percent increase in the quantity demanded of milk. e. A 10 percent increase in the price of milk leads to a 5 percent increase in the quantity demanded of milk.
Suppose sport utility vehicles get poor gas mileage compared to other available cars. If the price of gasoline increases, then one would expect:
A. the demand for gasoline to decrease. B. the quantity demanded of sport utility vehicles to decrease. C. the demand for sport utility vehicles to decrease. D. the demand for sport utility vehicles to increase.
If the government cuts taxes, then it has undertaken:
A. both a policy change and a regime change. B. a policy change. C. a regime change. D. neither a policy change nor a regime change.
"Essential elements" refers to
A. tasks that are most important for job success. B. activities and duties rated critical by management. C. tasks that cannot be reassigned to other workers. D. highly rated tasks in a task inventory.