Assume that due to unfavorable conditions in a prime honey-producing area, the price of honey increases by 50 percent. The quantity consumed of herbal tea declines immediately by 25 percent. Everything else held constant, the:
a. cross-price elasticity of demand for herbal tea and honey is negative, and therefore the two goods are substitutes.
b. cross-price elasticity of demand for herbal tea and honey is negative, and therefore the two goods are complements.
c. cross-price elasticity of demand for herbal tea and honey is positive, and therefore the two goods are substitutes.
d. cross-price elasticity of demand for herbal tea and honey is positive, and therefore the two goods are complements.
e. cross-price elasticity of demand cannot be determined from the information provided.
b
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According to proponents of the interest-rate-based monetary policy transmission mechanism, any increase in the money supply
A) causes velocity to increase, and so in the short run nominal Gross Domestic Product (GDP) must increase. B) will increase Gross Domestic Product (GDP) only if interest rates fall and investment is sensitive to decreasing interest rates. C) is effective in increasing Gross Domestic Product (GDP) only if it causes an outward shift of the aggregate supply curve. D) will move the economy from the "liquidity trap" during times of recession if interest rates fall enough to stimulate private investment.
Which of the following activities are production?
A) combining flour, milk, and eggs to make cookies B) moving coal from southern Illinois to an electrical power plant in northern Illinois C) taking ice cubes from a tray to put in a drink D) All of the above are production.
U.S. economic data from 1955 to 2000 show that both unemployment and inflation rates increased during that period
a. True b. False Indicate whether the statement is true or false
A basic message of Ricardo's theory of comparative advantage is that
What will be an ideal response?