Answer the following statement(s) true (T) or false (F)
1. The elasticity of a linear demand curve changes along the length of the curve—from relatively inelastic at higher price ranges to relatively elastic at lower price ranges.
2. Sometimes the quantity of a good demanded is affected by the price of a related good.
3. Cross-price elasticity of demand indicates whether the goods in question are substitutes or complements for one another.
4. According to economist Jean-Pierre Dube, Coca-Cola is a good substitute for Pepsi because the two products have a cross price elasticity of -.5.
5. Income elasticity of demand is a measure of the relationship between a relative change in income and the consequent relative change in demand, ceteris paribus.
1. False
2. True
3. True
4. False
5. True
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A competitive price-searcher market is characterized by firms
a. being able to choose their price and by low barriers preventing firms from entering or leaving the market. b. being able to choose their price and by high barriers preventing firms from entering or leaving the market. c. having to accept the market price for their product and by high barriers preventing firms from entering or leaving the market. d. having to accept the market price for their product and by low barriers preventing firms from entering or leaving the market.
Because of the multiplier, a one-time change in expenditure will...
a) have little secondary effect on real GDP b) expand real GDP by an infinite amount c) generate more additional real GDP than the initial change in expenditure d) decrease saving and investment activity and thereby decrease future real GDP