What does price elasticity of demand measure? When is demand elastic? Inelastic? Unit elastic?
What will be an ideal response?
Price elasticity of demand measures the responsiveness of the quantity of a product demanded to a change in the price of the product. Demand is elastic when the percentage change in quantity demanded is greater than the percentage change in price. Demand is inelastic when the percentage change in quantity demanded is less than the percentage change in price. Demand is unit elastic when the percentage change in quantity demanded is equal to the percentage change in price.
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Max has allocated $100 toward meats for his barbecue. His budget line and indifference map are shown in the above figure. If Max is currently at point e,
A) the absolute value of his MRS is less than the trade-off offered by the market. B) he is willing to give up more burger than he has to, given market prices. C) he is not maximizing his utility. D) All of the above.
Stagflation
a. is caused by a negative demand shock b. is theoretically impossible c. is a long-run phenomenon d. was rampant during the Great Depression e. is the combination of rising price levels and negative GDP growth