Why is the demand for a luxury generally more elastic (or less inelastic) than the demand for a necessity?
What will be an ideal response?
Demand for a necessity is generally less elastic than demand for a luxury because there are fewer substitutes for a necessity. Because there are more substitutes for a luxury than a necessity, the elasticity of demand for a luxury is larger is than the elasticity of demand for a necessity.
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Advocates of flexible exchange rates claim that under flexible exchange rates, the central bank of
A) an overheated economy could cool down activity by increasing the money supply without worrying that undesired reserve inflow would undermine its stabilization effort. B) a cooled economy could cool down activity by contracting the money supply without worrying that undesired reserve inflow would undermine its stabilization effort. C) an overheated economy could cool down activity by contracting the money supply without worrying that undesired reserve inflow would undermine its stabilization effort. D) an overheated economy could cool down activity by contracting the money supply without worrying that undesired reserve outflow would undermine its stabilization effort. E) an overheated economy could cool down activity by decreasing employment and increasing output without worrying that this would undermine its stabilization effort.
The sacrifices made by societies in order to engage in military spending represent:
A. the nominal costs of military spending. B. the real costs of military spending. C. the opportunity costs of military spending. D. the excessive costs of military spending.