Why is elasticity of demand greater for goods that are a large share of a consumer's budget?
What will be an ideal response?
The greater the share of a consumer's budget accounted for by a good, the greater the elasticity of demand because the real income effect is greater. An increase in the price of a good that accounts for a relatively large share of the budget means that the consumer would have to significantly reduce spending on other goods. It is also more likely the consumer will also cut back on consumption of the good itself too.
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Between Independence and the Civil War, American population growth was
(a) steady and constant. (b) rapid but wildly unstable. (c) positive and rapid. (d) heavily concentrated in the settlement in Western lands.
The downward-sloping aggregate demand curve is partly due to the:
A. positive relationship between the price level and net exports. B. negative relationship between the price level and net exports. C. positive relationship between the price level and government spending. D. negative relationship between the price level and government spending.
A critical assumption
a. makes an economic model a more concrete representation of reality b. eliminates unnecessary details from an economic model c. has an important impact on the conclusions of an economic model d. is usually implicit in an economic model e. increases the level of abstraction of an economic model
The price of gasoline has risen and the quantity sold has fallen. This was likely caused by
a. a rise in the price of crude oil. b. a seasonal rise in the demand for gasoline. c. use of a new public transit system. d. the discovery of crude oil in New Jersey.