Is demand for electricity more price elastic when measured over a short period of time or a long period of time? Explain.
What will be an ideal response?
It is more price elastic over a long period of time because there are more substitutes in a long period of time. If electricity prices get high people have little choice but to pay them in the short run. In the long run people can invest in solar heat, use gas stoves, add insulation, and do other things to reduce their consumption of electricity. Since there are more substitutes in the long run the elasticity is higher.
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Economics is about the allocation of scarce resources. Which of the following is NOT an example of economic scarcity?
A) If Steve goes to see a movie on Saturday, he will not be able to afford buying ice cream. B) If Jenny studies for her economics quiz this evening, she will not have time to walk her dog. C) If General Motors increases its production of SUVs this year, it will have to spend more on advertising. D) If Barnes and Noble bookstore increases the number of titles it carries, it will have to reallocate shelf space to accommodate the new titles.
How does the original, simplified Keynesian model compare with modern Keynesian analysis?
A) The original Keynesian model assumed price flexibility whereas the modern analysis does not. B) In both cases, the short-run aggregate supply curve (SRAS) is horizontal. C) Modern analysis shows an upward sloping SRAS to reflect some price flexibility. The original Keynesian model's SRAS is horizontal and assumes sticky prices. D) all of the above
Returns to scale is a ______ concept because ______.
A. short-run; it's related to the law of diminishing marginal returns B. short-run; it deals with varying the level of one input while holding other inputs constant C. long-run; a firm can change its output level only in the long run D. long-run; it refers to changes in all of the firm's inputs
When the economy entered a serious recession in 2008, the response of the U.S. government was to institute a $700 billion bailout plan, pursue other heavy deficit spending, and take on unusually large liabilities through bond and money market fund guarantees. This is an example of:
A. procyclical fiscal policy. B. fiscal policy that employs automatic stabilizers as the primary means of economic stabilization. C. sound finance as fiscal policy. D. functional finance and expansionary fiscal policy.