For each of the following pairs of products, discuss which of the two would be expected to be more price elastic and explain why.
i. water vs. diamonds
ii. insulin vs. cough syrup
iii. meat vs. filet mignon
iv. gasoline right after a major hurricane vs. gasoline over that entire summer
i. Water is a necessity whereas diamonds are not. Therefore, diamonds have the more price elastic demand.
ii. There are many brands of cough syrup yet insulin has no substitutes. Therefore, cough syrup has the more price elastic demand.
iii. Filet mignon is a subset of meat in general and thus has more substitutes. Therefore, filet mignon has the more price elastic demand.
iv. Demand is more price elastic, the longer the time period because people have more time to search out or develop substitutes. Therefore, gasoline over the course of the summer had more price elastic demand .
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The equilibrium quantity will decrease and the price might rise, fall, or stay the same when the
A) demand and the supply of a good both increase. B) demand for a good increases and the supply of it decreases. C) demand for a good decreases and the supply of it increases. D) demand and the supply of a good both decrease.
An optimal corrective tax should be placed on _____
a. the sellers of the externality-generating activity b. the inputs into the externality-generating activity c. the externality-generating activity d. the purchasers of the output of the externality-generating activity
As a share of GDP, U.S. spending on education is:
a. comparable to that of other wealthy nations in the OECD b. about 26% higher than the average of wealthy nations in the OECD c. about 26% lower than the average of wealthy nations in the OECD d. rising slowly, but steadily
If technology increases, then
A. the demand curve will shift to the left. B. the demand curve will shift to the right. C. the supply curve will shift to the left. D. the supply curve will shift to the right.