economics module 1
A flat demand curve represents
elastic demand, because price changes cause big changes in quantity demanded.
The Law of Demand implies that
people buy more of a good or service when its price declines.
In a market, several businesses go bankrupt and stop producing a product. As a result,
supply decreases, equilibrium price rises and equilibrium quantity falls.
The GDP deflator differs from the consumer price index (CPI) because
the GDP deflator includes prices of all goods and services in GDP, while the CPI includes only goods and services purchased by households.
The incomes of consumers decrease in the market for a normal good. As a result,
demand decreases, equilibrium price falls and equilibrium quantity falls.
All year long the weather is perfect for growing corn. As a result,
the supply of corn increases, equilibrium price falls and equilibrium quantity rises.
Suppose a 20% decrease in the price of pianos causes a 30% increase in piano sales. The elasticity of demand for pianos is
-1.5
Suppose a 5% decrease in the price of movie tickets causes a 15% increase in movie ticket sales. The elasticity of demand for movie tickets is
-3.
Suppose you earn $100,000 in 2020. Between 2020 and 2021 a price index increases from 200 to 220. To maintain the purchasing power of your salary, how much must you be paid in 2021? (Type your answer as a 6-digit number. Do not use a "$" sign.)
110000
In my work with the Indiana state legislature, I've found that the elasticity of demand for cigarettes is about -0.4. Suppose a 50 cent increase in the cigarette tax increases the price of cigarettes by about 20%. By what percentage would I predict the sales of cigarettes to change?
Sales would decrease by 8%.
Which of the following is likely to be a characteristic of a product that has inelastic demand?
The product has few substitutes.
If a market is in equilibrium
businesses are willing to produce all that consumers are willing to buy at the price of the product, so the price will remain unchanged
If there is a shortage in a market
businesses will realize that they can charge more for the product, and some consumers will bid more for the product, so the price will rise.
If there is a surplus in a market
businesses will realize that they must charge less for the product, and some consumers will bid less for the product, so the price will fall.
To calculate the real GDP growth rate,
first divide the GDP deflator by 100, then divide nominal GDP by the result to get real GDP, then take the percentage change in real GDP from one year to the next.
Widgets and gadgets are complementary goods. The price of widgets increases. As a result,
the demand for gadgets decreases, equilibrium price falls and equilibrium quantity falls.
Widgets and gadgets are substitute goods. The price of widgets decreases. As a result,
the demand for gadgets decreases, equilibrium price falls and equilibrium quantity falls.
The corporate bond interest rate spread shows
the difference between the riskier BAA corporate bond interest rate and the less-risky AAA corporate bond interest rate.
Structural unemployment occurs when
the skills of unemployed people do not match the skills required for available jobs, or the unemployed people are not located where the job openings are.