If a linear supply curve has a zero intercept, the elasticity of supply is always unitary
What will be an ideal response?
True. A linear supply curve from the origin takes the form Q = ap. Elasticity equals a ? p/Q. Substituting for Q yields a ? p/ap. Numerator and denominator cancel and the elasticity equals one at every price.
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The basic classical model can account for the procyclical behavior of money if there
A) are real business cycles caused by productivity shocks. B) is reverse causation from future output to money. C) are rational expectations among the public. D) are propagation mechanisms in the economy.
Equilibrium in the goods market occurs where
A) real GDP equals nominal GDP. B) aggregate expenditure equals autonomous consumption. C) autonomous consumption equals induced consumption. D) aggregate expenditure equals real GDP.
Human capital consists of computers, tools and equipment owned by private individuals
a. True b. False Indicate whether the statement is true or false
The impact of an increase in government purchases may be smaller than first assumed (in the crowding out effect) because: a. As the new spending takes place, income and real GDP will rise which will cause households and firms to increase their demand for money to accommodate increased buying and selling. b. The increase in the demand for money will cause the interest rate to rise
c. As a result of the higher interest rate, consumers may decide against buying a car, a home, or other interest sensitive goods, and businesses may cancel or scale back plans to expand or buy new capital equipment. d. All of the above