When is demand perfectly elastic? When is demand perfectly inelastic? What are the values of the price elasticity of demand when demand is perfectly elastic or perfectly inelastic? What do perfectly elastic and perfectly inelastic demand curves look like?
What will be an ideal response?
Demand is perfectly elastic when quantity demanded is infinitely responsive to price. If demand is perfectly elastic, price elasticity of demand equals infinity, and the demand curve is a horizontal line. Demand is perfectly inelastic when quantity demanded is completely unresponsive to price. If demand is perfectly inelastic, price elasticity of demand equals zero, and the demand curve is a vertical line.
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Consider a negative income tax. As discussed in your textbook, under the negative income tax, each person is entitled to a grant of G dollars per month. For every dollar the person earns, the grant is reduced by t dollars. Suppose G = 200 and t = 0.40. Consider an individual whose hourly wage is $10. There are 30 days in a month (so T is 720). Sketch the budget constraint before and after the introduction of a negative income tax.
What will be an ideal response?
According to economists who explain the Phillips curve, a decline in the unemployment rate causes higher rates of inflation because
a. workers are concerned about protecting their jobs and so they accept smaller wage increases b. during periods of GDP growth, firms find it easier to pay higher wage rates and charge higher prices without worrying about losing markets c. firms decrease production and compete less aggressively for workers during periods of inflation d. workers feel less secure about their jobs and demand higher pay raises e. the Laffer curve comes into effect
Given the total cost function TC = 2,000 + 2Q, when output is 1,000 units average total cost is ________ and total fixed cost is ________.
A. $2; $2 B. $4; $2 C. $4,000; $2,000 D. $4; $2,000
The dollar value of final output
A. is greater than total income. B. equals profits. C. is equal to total income. D. is less than total income.