When economists look at the percentage change in quantity demanded generated by a change in income, they are looking at:
a. price elasticity of demand.
b. income elasticity of demand.
c. price elasticity of supply.
d. cross elasticity of demand.
e. cross elasticity of supply.
b
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Use the following graph to answer the next question.
In the graph, Dt is the transactions demand for money, Dm is the total demand for money, and Sm is the supply of money. The market is initially in equilibrium at a 6% interest rate. If the money supply increases, then Sm2 will shift to
A. Sm3 and the interest rate will be 8%. B. Sm3 and the interest rate will be 4%. C. Sm1 and the interest rate will be 8%. D. Sm1 and the interest rate will be 4%.
As healthy people leave an insurance pool, premiums rise, which cause more people to leave the pool and even higher premiums. This describes
A) moral hazard. B) the reversibility paradox. C) irrational pricing. D) a premium death spiral.
A steel mill raises the price of steel by 7%, which results in a 20% reduction in the quantity of steel demanded. The demand curve facing this firm is: a. elastic
b. inelastic. c. unit elastic. d. unit inelastic.
The price tag on a golf ball in 1975 read $0.20, and the price tag on a golf ball in 2005 read $2.00 . The CPI in 1975 was 52.3, and the CPI in 2005 was 191.3 . The price of a 1975 golf ball in 2005 dollars is
a. $0.05. b. $0.53. c. $0.73. d. $2.00.