A fall in the price of cabbage from $10.50 to $9.50 per bushel increases the quantity demanded from 18,800 to 21,200 bushels. The price elasticity of demand is
A) 0.80.
B) 1.20.
C) 1.25.
D) 8.00.
B
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While specialization and exchange were very important to Adam Smith in 1776, they have largely lost their importance in the 21st century.
Answer the following statement true (T) or false (F)
In the income-expenditure model, for each price level there is a different equilibrium output level. These various price level and equilibrium output combinations are used to derive
A) the slope of the planned expenditures line. B) the aggregate supply curve. C) the aggregate demand curve. D) a point on the aggregate demand curve.
If the economy is growing 3% a year and the government increases the ratio of interest on the national debt to GDP, we may conclude that
A) the output ratio will fall. B) additional interest payments exceed 3% of GDP. C) tax revenues will fall. D) the Laffer curve will be inoperable.
If the price of an item can freely adjust, a market will
A) always move towards equilibrium. B) always have an excess quantity demanded. C) always have an excess quantity supplied. D) never move towards equilibrium because prices are always increasing.