Explain what the slope of the income consumption curve shows about the income elasticity of demand
What will be an ideal response?
A positive slope of the income consumption curve is associated with a positive income elasticity of demand, and a negatively sloped income consumption curve is associated with a negative income elasticity of demand. The income consumption curve represents how consumption changes with an increase in income. An upward-sloping income consumption curve represents an increase in consumption as income rises, as does a positive income elasticity.
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The textbook tells us that in the short run, people typically ___________ price changes when compared to the long run
a. are very responsive to b. are more sensitive to c. are less sensitive to d. do not respond to e. are unaware of
Which of the following situations will cause the demand for U.S. dollars to rise in the foreign exchange market?
a. The price level in the United States rises faster than the price level in the United Kingdom. b. The interest rate in the United Kingdom falls while the interest rate in the United States remains constant. c. The real GDP in the United States grows while the real GDP in the United Kingdom remains constant. d. The tax rate in the United States rises while the tax rate in the United Kingdom does not change.