Suppose there are only two goods, apples and oranges. What happens if the price of each good increases by 15 percent?
a. The consumer will substitute apples for oranges.
b. The consumer will substitute oranges for apples.
c. There is no substitution effect because relative prices have remained constant.
d. Demand for both goods increases.
e. Demand for both goods decreases.
C
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A person is preparing for a long automobile trip and cashes in a certificate of deposit for cash in case of emergencies along the way. This is an example of the
A) transactions demand for money. B) asset demand for money. C) precautionary demand for money. D) wealth demand for money.
Suppose the market for grass seed is expressed as
Demand: QD = 100 - 2p Supply: QS = 3p Price elasticity of supply is constant at 1. If the supply curve is changed to Q = 8p, price elasticity of supply is still constant at 1. Yet, with the new supply curve, consumers pay a larger share of a specific tax. Why?
Increasing marginal cost of production explains:
A. the law of demand. B. the income effect. C. why the supply curve is upsloping. D. why the demand curve is downsloping.
Ultimately, the real burden of paying for Social Security benefits will be paid for by
A. taxes levied on workers. B. new federally issued Treasury bills. C. Social Security trust fund bonds. D. a new tax levied on businesses.