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?
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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Rather than seeking to balance the budget, Keynesian economists argue that the government's tax and spending policies should be determined by the
a. demand for government-provided public goods. b. level of aggregate demand required to achieve full employment of resources. c. size and quality of the labor force. d. need to expand or contract the supply of money.
A PPF is more likely to be a downward-sloping curve that is bowed outward than a downward-sloping straight line because most resources are
A) better suited for the production of some goods than others. B) used efficiently. C) relatively cheap at low levels of output. D) used to produce consumption goods.
Exhibit 11-4 Supply and demand curves for food servers
If the equilibrium wage rate in Exhibit 11-4 increased, the cause could be that:
A. the wage increased. B. the marginal product of labor decreased. C. either the demand for labor increased or the supply of labor decreased. D. the price of the product produced by the labor decreased.
Use the Great Recession of 2007–2009 to describe the paradox of thrift.
What will be an ideal response?