If the elasticity of demand for the latest American Idol album is 1.4, this means
A. a 1 percent increase in the price leads to a 14 percent decrease in quantity demanded.
B. few substitutes for the American Idol album exist.
C. a 5 percent increase in the price leads to a 7 percent decrease in quantity demanded.
D. a 10 percent decrease in the price leads to a 140 percent increase in quantity demanded.
Answer: C
You might also like to view...
If the Fed wants to stimulate the economy, ________
A) it reduces money supply B) it lowers spending C) it increases tax rates D) it lowers short-run interest rates
Q: How many economists does it take to change a light bulb? A: All. Because then you will generate employment, more consumption, moving the aggregate demand curve to the right. This joke represents the view of
A) classical economists. B) Keynesian economists. C) economists who contend that money illusion never occurs. D) economists who conclude that wages and prices are very flexible.
Cartels:
a. encourage competition. b. attempt to restrict output in order to raise prices. c. rely on legally enforceable contracts between cartel participants. d. rely on advertising and packaging to increase profits. e. All of the above.
Suppose OPEC succeeds in raising world oil prices by 300 percent. This price increase causes inventors to look at alternative sources of fuel for internal-combustion engines. A hydrogen-powered engine is developed which is cheaper to operate than gasoline engines. Which problems in the construction of the CPI does this situation represent?
a. substitution bias and introduction of new goods b. introduction of new goods and unmeasured quality change c. substitution bias and unmeasured quality change d. income bias and substitution bias