Define the following terms and explain their importance to the study of economics.
a. price elasticity
b. complements
c. substitutes
d. cross elasticity
e. supply elasticity
What will be an ideal response?
a. Price elasticity is the ratio of the percentage change in quantity demanded to the percentage change in price that brings about the change in quantity demanded. The term is used extensively in economic predictions.b. Two goods are called complements if an increase in the quantity consumed of one increases the quantity demanded of the other, all other factors remaining constant.c. Two goods are called substitutes if an increase in the quantity consumed of one cuts the quantity demanded of the other, all other factors remaining constant.d. Cross elasticity of demand for some good X to a change in the price of another good Y is the ratio of the percentage change in quantity demanded of X to the percentage change in the price of Y that brings about the change in quantity demanded. This is used in antitrust analysis in determining the boundary of a market.e. Supply elasticity is the ratio of the percentage change in quantity supplied to the percentage change in price that brings about the change in quantity supplied. The term is used extensively in economic predictions.
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Which of the following is a prediction of the median voter model for a two person political race?
A) Candidates will try to present themselves as extremists. B) Candidates who are behind in the polls will try to move closer to the position of their opponents. C) Candidates will try to label their opponents as "too middle-of-the-road." D) Candidates will try to be specific and clear about their own programs and the means of achieving them.
Which of the following is not held constant along a given demand curve for a good?
A. Consumer tastes. B. Price of the good itself (own price). C. Consumer's income. D. The price of substitute goods.
(1)(2)(3)(4)(5)QdQdPriceQsQs5040$1070806050960708060850609070740501008063040Refer to the above table. If demand is represented by columns (3) and (1) and supply is represented by columns (3) and (4), equilibrium price and quantity will be:
A. $7 and 30 units. B. $9 and 60 units. C. $10 and 60 units. D. $8 and 80 units.
The gold standard is
A. a type of fixed exchange rate system. B. a type of managed flexible exchange rate system. C. a type of floating exchange rate system. D. a currency exchange system without exchange rates.