What makes the demand for some goods elastic and the demand for other goods inelastic?
What will be an ideal response?
The magnitude of the price elasticity of demand for a good depends on three main influences:
• Closeness of substitutes. The more easily people can substitute other items for a particular good, the larger is the price elasticity of demand for that good.
• The proportion of income spent on the good. The larger the portion of the consumer's budget being spent on a good, the greater is the price elasticity of demand for that good.
• The time elapsed since a price change. Usually, the more time that has passed after a price change, the greater is the price elasticity of demand for a good.
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At the original exchange rate an import quota
a. creates a surplus in the market for foreign-currency exchange, so the exchange rate rises. b. creates a surplus in the market for foreign-currency exchange, so the exchange rate falls. c. creates a shortage in the market for foreign-currency exchange, so the exchange rate rises. d. creates a shortage in the market for foreign-currency exchange, so the exchange rate falls.
A potato farmer who signs a futures contract is
A) speculating on the future price of potatoes, hoping it will be higher. B) speculating on the future price of potatoes, hoping it will be lower. C) eliminating his exposure to risk from a falling potato price. D) trying to influence the price of potatoes to rise.
Something whose value does not change is a:
A) variable. B) constant. C) hypothesis. D) all of the above.
Refer to the graph shown.
The poorest 30 percent of the families earn:
A. 9 percent of the income. B. 15 percent of the income. C. 2 percent of the income. D. 5 percent of the income.