Which of the following would tend to INCREASE the elasticity of demand for good X?
A. a new product, Y, which can be used in place of X, is introduced.
B. the percent of a consumer's income spent on good X declines.
C. a new discovery allows firms to produce X at a much lower cost.
D. both b and c
E. all of the above
Answer: A
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Refer to Figure 2. All else equal, a major paper manufacturer filing for bankruptcy and shutting down as a result of an IRS tax evasion investigation would cause a move from
a. x to y. b. y to x. c. SA to SB. d. SB to SA
If a small plant is more efficient than either a medium-sized or a large plant, the situation must be one of
a. increasing returns to scale. b. decreasing returns to scale. c. constant returns to scale. d. None of these.
Everything else held constant, if consumption expenditure increases by 65 for a 100 increase in disposable income, the mpc is
A) 0. B) 0.5. C) 0.65. D) 1.
An L-shaped isoquant
A) is impossible. B) would indicate that the firm could switch from one output to another costlessly. C) would indicate that the firm could not switch from one output to another. D) would indicate that capital and labor cannot be substituted for each other in production. E) would indicate that capital and labor are perfect substitutes in production.