What are the main determinants of demand elasticity? Explain their importance.
What will be an ideal response?
First is the nature of the good. Necessities have less-elastic demand than do luxury goods. Second is the availability of close substitutes. The more substitutes exist and the closer they are to the original good, the more elastic demand will be. Third is the fraction of income absorbed; the smaller the fraction of income spent on an item, the more elastic demand will be. Fourth is the passage of time; the more time that passes after a price change, the greater the demand elasticity.
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If the six-month Treasury bill has an interest rate of 0.5%, the ten-year Treasury bond has an interest rate of 1.6%, and a ten-year bond issued by Dell has an interest rate of 4%, what is the risk premium on Dell's bond?
What will be an ideal response?
If mayonnaise and Miracle Whip are substitutes, then which of the following would increase the demand for Miracle Whip?
a. a decrease in the price of Miracle Whip b. an increase in the price of mayonnaise c. a decrease in the price of mayonnaise d. Both a and b are correct.
Which of the following is true about this firm?
A. Society can benefit from government regulation using marginal cost pricing without a subsidy. B. It is a natural monopoly. C. Marginal cost pricing will assure technical efficiency. D. Profit regulation will assure allocative efficiency.
(Figure: The Market for Round-Trip Airline Flights) Look at the figure The Market for Round-Trip Airline Flights. The supply and demand graph represents the market for round-trip airline flights between Boston and New York. Suppose the mayor of New York decides to limit the number of flights to Q1 to reduce air pollution. What area or areas represent consumer surplus after the quota is in place?
A) c+e B) a C) b+d+f D) a+b+c