Briefly explain the economic concept of elasticity
What will be an ideal response?
Elasticity is a measure of how one economic variable responds to changes in another economic variable.
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Susan quit her job as a teacher, which paid her $36,000 per year, in order to start her own catering business. She spent $12,000 of her savings, which had been earning 10 percent interest per year, on equipment for her business. She also borrowed $12,000 from her bank at 10 percent interest, which she also spent on equipment. For the past several months she has spent $1,000 per month on
ingredients and other variable costs. Also for the past several months she has taken in $3,500 in monthly revenue. In the short run, Susan should a. shut down her business, and in the long run she should exit the industry. b. continue to operate her business, but in the long run she should exit the industry. c. continue to operate her business, but in the long run she will probably face competition from newly entering firms. d. continue to operate her business, and she is also in long-run equilibrium.
Which of the following is a possible reason for there being so few firms in oligopoly market structures?
a. easy to enter or exit the industry b. economies of scale c. differentiation of the product d. none of the above are reasons for so few firms in an oligopoly
Disposable personal income is equal to
A. Gross Domestic Product (GDP) minus depreciation. B. personal income plus transfer payments. C. national income minus personal income taxes. D. personal income minus personal income tax payments.
The absolute value of the marginal rate of substitution is a measure of
A. the slope of a budget constraint. B. the relative price of two goods. C. income effect of a price change. D. the slope of an indifference curve.