Define the law of demand and explain how this relates to typical human behavior.
What will be an ideal response?
The law of demand says that the quantity of a good demanded in a given time period increases as its price falls, ceteris paribus. Typically people respond to price when buying a good. People are usually willing to buy more of a good at a lower price.
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Substitution bias:
a. overstates the rise in a consumer’s true cost of living. b. understates the rise in a consumer’s true cost of living. c. overstates the decrease in a consumer’s true cost of living. d. understates the decrease in a consumer’s true cost of living.
Joan has the following assets and liabilities:Credit card balance$1,000Cash$200Government bonds$3,000Stock$4,000Checking$1,500Car loan balance$10,000Car$15,000 Which of the following actions would decrease Joan's money demand by $200?
A. Joan writes a $200 check for cash and holds the cash. B. Joan gets a $200 cash advance on her credit card and puts the proceeds in her checking account. C. Joan sells $200 worth of stocks and puts the proceeds in her checking account. D. Joan writes a check for $200 to purchase additional shares of stock.
Among the liabilities of commercial banks are deposits.
Answer the following statement true (T) or false (F)
Subsidizing education can lead an efficient level of production because education has external benefits
Indicate whether the statement is true or false