If both prices decreases by 50%,
A) budget constraint will be unchanged.
B) slope of the budget constraint will increase.
C) slope of the budget constraint will decrease.
D) budget constraint will shift outward in a parallel fashion.
D
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Use the graph below to answer the next question.
Other things equal, a decrease in the price of a substitute resource would cause a
A. move from a to b on D1. B. move from b to a on D1. C. shift from D3 to D2 assuming the output effect exceeds the substitution effect. D. shift from D2 to D3 assuming the output effect exceeds the substitution effect.
Supply-side policies are focused on ______.
a. short-run stabilization b. both short and long-run stabilization c. increasing long-run industry regulation d. decreasing long-run aggregate supply
How is elasticity related to the revenue from a sales tax?
A. If demand is inelastic, then raising tax rates will decrease tax revenue paid by consumers. This principle works similarly with supply. With elastic supply and demand, increasing taxes will increase quantity supplied and quantity demanded enough to cause an increase in tax revenue. B. If demand is inelastic, then raising tax rates will decrease tax revenue paid by consumers. The elasticity of supply has no effect on taxes because taxes only matter to consumers (who have to pay the taxes). C. If demand is inelastic, then raising tax rates will increase tax revenue paid by consumers. This principle works similarly with supply. With elastic supply and demand, increasing taxes will decrease quantity supplied and quantity demanded enough to cause a decrease in tax revenue. D. If demand is inelastic, then raising tax rates will increase tax revenue paid by consumers. The elasticity of supply has no effect on taxes because taxes only matter to consumers (who have to pay the taxes). References
Suppose buyers in the used car market are willing to pay $3,500 for a plum (high-quality) used car and $1,500 for a lemon (low-quality) used car. If buyers believe that 30% of the used cars on the market are lemons (low quality), what would they be willing to pay for a used car?
A. $2,000 B. $2,500 C. $2,900 D. $3,500