Explain why the price elasticity varies even when a firm faces a linear demand curve.
What will be an ideal response?
A linear demand curve has a constant slope. A constant slope implies only that absolute changes in quantity demanded remain unchanged with respect to a unit change in price. However, the concept of price elasticity is based on percentage change rather than absolute change. Thus, even if the slope of a demand curve is constant, percentage change in quantity demanded and percentage change in price between two different points vary.
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"As consumption of a good increases, the extra satisfaction received from consuming an additional unit of the good decreases." This statement is known as the law of:
a. demand. b. increasing costs. c. diminishing marginal utility. d. diminishing marginal returns. e. total utility.
The U. S. committed itself to creating a free trade zone between the U.S., Canada and Mexico. Why might this be important? Relative to imports and exports to other nations, what is the size of these two North American trading partners trade relationship with the U.S.?
Most economists believe that biases cause changes in the CPI to overstate the inflation rate by ________ percentage points
A) 0.1 to 0.2 B) 0.2 to 2.0 C) 0.4 D) 0.5 to 1.0 E) 1.0 to 3.0
Under monetary neutrality, an increase in the money supply causes output to ________ and the price level to ________.
A. rise; rise B. not change; rise C. rise; not change D. not change; not change