If the quantity demanded increases by 20 percent in response to a 10 percent decrease in price, demand is classified as
a. unstable.
b. relatively inelastic.
c. relatively elastic.
d. of unitary elasticity.
C
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Consider Jen, a consumer with preferences U(H,F) = F1/3H2/3, where H is the quantity of housing and F is the quantity of food (per month)
Suppose Jen has a stipend of $600/month which she uses to purchase food at a price of $1/unit and housing at a price of $10/unit. a. Compute Jen's utility-maximizing bundle of goods. b. Suppose that Jen's employer subsidizes housing by paying 50% of her total housing costs, thereby effectively lowering the price Jen pays for housing to $5/unit. Compute Jen's new optimal consumption bundle. c. How much does Jen's employer pay in total for this subsidy? How much utility does Jen enjoy with this subsidy (compute her utility at the optimal bundle). d. Suppose that her employer simply gave Jen the dollar cost you found in (c) as a lump sum (instead of subsidizing housing). Will Jen gain a higher utility from the housing subsidy or the lump-sum equivalent transfer?
Assume that product X has a positive cross elasticity with respect to shoes. If the price of shoes rises
A) the demand for product X will decrease. B) the quantity demanded for product X will increase. C) the demand for shoes will fall. D) the demand for product X will increase.
The percentage of the noninstitutionalized working-age individuals who are employed or seeking work is known as
A. the labor force. B. the stock of employed and unemployed workers. C. discouraged worker. D. the labor force participation rate.
If the actual money multiplier equals the potential money multiplier and if the Federal Reserve wishes to increase the money supply by $500 when the reserve ratio is 20 percent, it should
A. sell $1,000 of government bonds. B. buy $1,000 of government bonds. C. buy $100 of government bonds. D. sell $100 of government bonds.