Explain why it is so important for a business to understand the concept of price elasticity and be able to measure this for its products.
What will be an ideal response?
The choice of what prices will maximize revenues and profits is very important to businesses. Knowing what the price elasticity of demand is for their products will help them choose the best prices. If demand is highly elastic, total revenues will rise if price is reduced because consumers have many substitutes and they will respond in a big way to a sale. If demand is very inelastic, they can increase revenues by increasing price because not all of their customers will switch to substitutes.
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Oscar and Felix room together in an apartment in New York City. Oscar is very messy and Felix is obsessed with neatness. Felix cannot stand a messy apartment and is even willing to pay Oscar $50 per week for him to clean up after himself
Oscar hates to clean up so much that he is willing to pay Felix $30 per week to maintain his messy habits. If Felix has the right to a clean apartment explain why the apartment will be clean. If Oscar has the right to remain messy explain why the apartment will still be clean.
An increase in
A) nominal output raises the interest rate while a fall in real output lowers the interest rate, given the price level and the money supply. B) real output decreases the interest rate while a fall in real output increases the interest rate, given the price level. C) real output raises the interest rate while a fall in real output lowers the interest rate, given the money supply. D) nominal output raises the interest rate while a fall in real output lowers the interest rate, given the price level. E) real output raises the interest rate while a fall in real output lowers the interest rate, given the price level and the money supply.
In the basic closed-economy ISLM model, as the interest sensitivity of investment spending increases, fiscal policy has ________ effect on output and monetary policy has ________ effect on output
A) less; less B) more; more C) more; less D) less; more
Health care improvements often don't happen because:
A. health care facilities exist in most parts of the world. B. home remedies and traditional village doctors are more affordable. C. doctors in government clinics have large incentives to practice good medicine. D. people are generally resistant to improvements in their healthcare systems.