What does price elasticity of demand measure? When is demand elastic? Inelastic? Unit elastic?
What will be an ideal response?
Price elasticity of demand measures the responsiveness of the quantity of a product demanded to a change in the price of the product. Demand is elastic when the percentage change in quantity demanded is greater than the percentage change in price. Demand is inelastic when the percentage change in quantity demanded is less than the percentage change in price. Demand is unit elastic when the percentage change in quantity demanded is equal to the percentage change in price.
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If the nominal rate of interest on a bond was 5 percent, the inflation rate was 3 percent and an individual was in a 25-percent tax bracket, the after-tax real return on the bond would be equal to
a. 2 percent. b. 2.5 percent c. .5 percent.. d. -.5 percent. e. none of the above.
There are several criticisms of the minimum wage. Which of the following is not one of those criticisms? The minimum wage
a. often hurts those people who it is intended to help. b. results in an excess supply of low-skilled labor. c. prevents some unskilled workers from getting needed on-the-job training. d. fails to raise the wage of any employed person.
If price is regulated in a 2-firm oligopoly modeled along the Hotelling line, firms will compete by differentiating their products.
Answer the following statement true (T) or false (F)
Credence goods are particularly susceptible to the lemons problem because
A) they have qualities that are difficult for producers to fully assess. B) they have qualities that are difficult for consumers to fully assess. C) creative responses among producers create volatility in market supply. D) creative responses among consumers create volatility in market demand.