During a recession when people's incomes drop, grocery chains experience much smaller declines in sales than do upscale department stores. Explain this phenomenon using the concept of elasticity
What will be an ideal response?
During a recession, people's income decreases leading to a decrease in the quantity of normal goods they buy. The demand for necessities, however, is less income elastic, that is, less responsive to a change in income, than the demand for luxuries. So grocery stores, which sell mainly necessities, lose fewer sales than do upscale department stores, which sell luxury items.
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Which of the following policy options would not be used to eliminate an inflationary gap?
a. Decrease government spending. b. Decrease consumption. c. Increase investment. d. Decrease taxes.
Which statement best describes social surplus?
a. the sum of consumer surplus and producer surplus b. the amount that a seller is paid for a good minus the seller’s actual cost c. the amount that individuals would have been willing to pay, minus the amount that they actually paid d. when it is impossible to improve the situation of one party without imposing a cost on another
A particular brand of toothpaste costs 4 British pounds in London. The nominal exchange rate is .80 and the real exchange rate is about 1.16 . These numbers imply that the U.S. price of the same toothpaste is about
a. $5.79 b. $4.29 c. $3.70 d. $2.76
Economic development encompasses which of the following measures?
a. The political environment b. All of the answers are correct. c. Education d. Economic growth