Explain why when the demand curve for a good is elastic, a one percent reduction in the price of the good will increase a consumer's expenditure on the good

What will be an ideal response?


When a good has an elastic demand, a one percent decrease in the price will result in a greater than one percent increase in the quantity demanded. Thus, the price multiplied by the quantity will increase when the price declines by one percent.

Economics

You might also like to view...

An example of a firm's fixed cost would be the

a. monthly rent it pays based on a multiple-year lease b. cost of employing labor c. quantity of inventory it accumulates d. raw materials used in production e. cost of shipping the goods it produces

Economics

Japanese employers tend to hire employees right out of college and train them for a lifetime job with the company. Over time they found that women often, but not always, married after a few years and left the company so they were not good training investments. Based on this experience, and despite the exceptions, firms stopped hiring any women for jobs that require substantial training. This practice is called

A. economic discrimination. B. statistical discrimination. C. compensating differentials. D. the substitution effect.

Economics

The risk spread is:

A. assigned by a bond-rating agency. B. less than 0 (zero) for a U.S. Treasury bond. C. the difference between the bond's yield and the yield on a U.S. Treasury bond of the same maturity. D. the difference between a bond's purchase price and selling price.

Economics

Suppose that an economy produces 2400 units of output, employing the 60 units of input, and the price of the input is $30 per unit.

Refer to the information above. The per-unit cost of production is: A. $0.25 B. $0.50 C. $0.75 D. $2.00

Economics