When Fred's income was $100 per week, 10 units of good X were demanded. Now his income is $150 per week and 12 units of good X are demanded. Using the percentage change formula, the income elasticity of demand for good X equals
A) 0.45.
B) 0.40.
C) 2.20.
D) 2.50.
A
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A lender who is worried that its cost of funds might rise during the term of a loan it has made can hedge against this rise by
A) buying futures contracts on Treasury bills. B) selling futures contracts on Treasury bills. C) buying call options on Treasury bills. D) increasing the amount of money which it lends.
Suppose the production possibilities for two countries, producing either food or clothing, are shown in the above figure. They can each produce any linear combination as well. Free trade between these two countries will take place
A) as long as Canada is willing to give up 0.25 unit of clothing to get a unit of food. B) as long as USA asks for at least 1.5 units of clothing in exchange for a unit of food. C) as long as Canada asks for at least 3 units of food in exchange for a unit of clothing. D) as long as USA is willing to give up at least 1.5 units of food in exchange for a unit of clothing.
(I) Differences in worker productivity are one major reason why individual earnings differ.
(II) Even if all workers were identical, differences in the desirability of jobs would still cause earnings differentials. a. I is true; II is false. b. Both I and II are false. c. Both I and II are true. d. I is false; II is true.
Depreciation of the dollar refers to
A. An increase in the price of foreign currency in terms of dollars. B. A loss of foreign exchange reserves. C. A fall in the dollar price of a foreign currency. D. Intervention in international money markets.