What are the determinants of price elasticity of demand?
What will be an ideal response?
There are three important determinants of the price elasticity of demand. These are:
a) Closeness of substitutes: As the number of substitutes grows, the price elasticity of demand increases.
b) Budget share spent on the good: As a consumer spends more of his budget on a particular good, the good's price elasticity of demand increases.
c) Available time to adjust: The price elasticity of demand is lower for a good in the short run in comparison to the long run.
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Market economies are not constrained by scarcity; only planned economies have that problem.
Answer the following statement true (T) or false (F)
If the Fed lends to member banks, what happens to reserves and the money supply?
a. Reserves increase and the money supply decreases. b. Both increase. c. Reserves decrease and the money supply increases. d. Both decrease.
Keynes stated that the amount of savings is based on ________________________ and the demand for investment funds is based on the _________________.
Fill in the blank(s) with the appropriate word(s).
As a result of pure free trade in a commodity, the
A. price of the commodity must be the same in all countries. B. total quantity imported will exceed the total quantity exported. C. price of the commodity will be higher in the producing country. D. price of the commodity will be lower in the producing country.