Which of the following could explain why the demand for table salt is inelastic?
A) Salt is a luxury good.
B) Salt is a rare commodity.
C) Households devote a very small portion of their income to salt purchases.
D) Salt is a luxury for high-income consumers but a necessity for low-income consumers.
Answer: C
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In the short run, a price increase in the goods and services market measured by the CPI will: a. increase the purchasing power of money
b. improve producer profits and, thereby, induce suppliers to expand output. c. increase resource prices, lower profits, and lead to a decline in output. d. reduce the natural rate of unemployment.
A year-long drought that destroys most of the summer's crops would be considered a:
A. short-run supply shock. B. long-run demand shock. C. long-run supply shock. D. short-run demand shock.