The determinants of price elasticity of demand include:
A. availability of substitutes, cost relative to benefit, and scope of market.
B. degree of necessity, cost relative to income, scope of market, and adjustment time.
C. cost relative to income, scope of demand, and adjustment time.
D. availability of complements, cost relative to income, and scope of market.
Answer: B
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When there is a recessionary gap, inflation will ________, in response to which the Federal Reserve will ________ real interest rates, and output will ________.
A. decline; lower; decline B. increase; raise; decline C. decline; lower; expand D. decline; raise; decline
The slope of the aggregate demand curve indicates that ________ in the inflation rate leads to ________ of real GDP demanded by households and firms
A) an increase; a higher level B) a decrease; a lower level C) a decrease; a higher level D) an increase; no change in the level
One reason the oversimplified multiplier is incorrect is that inflation
A. increases the multiplier by increasing investment spending. B. increases the multiplier by increasing consumer spending. C. decreases the multiplier by increasing net exports. D. decreases the multiplier by decreasing consumer spending.
The term ceteris paribus is an economic assumption that means
A) let the buyer beware. B) logical common sense. C) the detail is in the interrelationship. D) other things being equal.