An elastic demand indicates that
A. relatively large changes in price are required to obtain a relatively small change in quantity demanded.
B. relatively small changes in price lead to relatively large changes in quantity demanded.
C. relatively large changes in quantity demanded lead to relatively large changes in price.
D. quantity demanded does not vary with changes in the price.
Answer: B
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Based on the above figure showing a budget line, which of the following combinations of soda and bottled water are not affordable?
A) 3 bottles of water and 4 cans of soda B) 4 bottles of water and 2 cans of soda C) 2 bottles of water and 6 cans of soda D) None of the above, that is, all the combinations listed are affordable.
A change in which of the following variables will have no direct effect on the level of domestic demand?
A) domestic income B) the real exchange rate C) government spending D) the interest rate (r) E) none of the above