Inelastic demand implies
A) that a one percent increase in price results in a smaller than one percent decrease in quantity demanded.
B) that a one percent increase in price results in a larger than one percent decrease in quantity demanded.
C) that a one percent cut in price results in a larger than one percent increase in quantity demanded.
D) that a one percent decrease or increase in price induces no change in total revenue.
A
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Explain why the deadweight loss from monopoly power may be exacerbated if the barrier to entry that creates monopoly power is created through exclusive government granting of a monopoly. For what types of government grants of monopoly power might this not be the case?
What will be an ideal response?
The above figure shows the payoff to two airlines, A and B, of serving a particular route. If the two airlines must decide simultaneously, what happens if the government imposes a $20 per firm tax on firms that service this route?
A) Neither firm has a dominant strategy. B) Not entering is a dominant strategy for both firms. C) Neither firm entering is a Nash equilibrium. D) Only firm A will enter.
The negative slope of the aggregate demand curve is caused by:
a. the real balances effect, the interest rate effect, and the price level effect. b. the real balances effect, the money supply effect, and the net exports effect. c. the interest rate effect, the net exports effect, and the real GDP effect. d. the real balances effect, the interest rate effect, and the net exports effect. e. the real balances effect, the interest rate effect, and the net export effect.
Television would have been considered a "new good" type of innovation because
A. consumers already regularly listened to the radio for entertainment. B. it gave companies a new source of advertising revenues. C. it enhanced the quality of life for most people in the economy. D. it had no equivalent in the past.