If a good is considered to be a luxury good, does it mean that the law of demand does not hold?
What will be an ideal response?
Luxury goods are those items the demand for which increases more than proportionately with an increase in income and therefore the income elasticity of demand is greater than one. This does not mean that the law of demand does not hold. As price increases, the quantity demanded for that good will still decline regardless of the income elasticity of demand.
A
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Historians are in general agreement that
(a) railroads opened the country and were built at great risk ahead of demand, gambling on the future. (b) railroads sharply cut down transportation costs, linking the country together in all directions and spurring the nation's growth far in advance of anything that might otherwise have been achieved. (c) railroads were the single innovation of the 19th century that created a great leap forward in terms of American economic growth. (d) none of the above are true.
Give an example of price elasticity for each of the following factors: 1) the availability of close substitutes and 2) the proportion of income spent on the good. Avoid using examples from the text.
What will be an ideal response?
Which statement is false?
A. Americans savings rate may not have been so low were it not for Social Security. B. widespread home ownership has lowered Americans savings rate. C. the U.S. suburban lifestyle has made it very difficult to save for most families. D. Americans savings rate increased during the 1990's and early 2000's.
Assume the demand curve for T-shirts is Q = 180 -15P or P = 12 - 0.0667Q. When are total revenues maximized?
A. When the price is $8.00 B. When the price is $3.00 C. When the price is $6.66 D. When the price is $6.00