"The number of substitutes available affects the price elasticity of demand for a good. So one way to know if apples and oranges are substitutes for each other is to look at the price elasticity of demand for each." Comment on this assertion
What will be an ideal response?
Their separate elasticities do not indicate whether apples and oranges are substitutes for each other. If apples and oranges are not substitutes but each had many other substitutes, then their separate price elasticities will be high. To conclude that apples and oranges are substitutes for each other, the cross elasticity of demand between them must be positive.
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In the figure above, the DLF curve is the demand for loanable funds curve and the PDLF curve is the private demand for loanable funds curve
If there is no Ricardo-Barro effect, the figure shows the situation in which the government has a ________ so that the equilibrium real interest rate is ________ and the equilibrium quantity of investment is ________. A) budget deficit; 6 percent; $1.5 trillion B) balanced budget; 6 percent; $1.5 trillion C) budget surplus; 4 percent; $1 trillion D) budget surplus; 6 percent; $1.5 trillion E) budget deficit; 4 percent; $1 trillion
Consider the currency market for British pounds and U.S. dollars. An increase in the supply of British pounds ________.
A. is equivalent to an increase in the demand for the U.S. dollar B. results in a depreciation of the pound and a depreciation of the dollar C. results in an appreciation of the pound and a depreciation of the dollar D. is equivalent to a decrease in the demand for the U.S. dollar
The difference between actual and potential GDP is called
A. an output gap. B. the output differential. C. a gap shortage. D. the output resistance.
The marginal cost curve intersects the average variable cost curve at the ________ value of the average variable cost curve.
A. average B. zero C. maximum D. minimum