In which of the following cases would the price elasticity of demand be expected to increase?
A) The number of close substitutes for the good increases.
B) The time period under consideration decreases.
C) The cost of the good relative to total income decreases.
D) The supply of the good increases.
A
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During the past twenty years, the prices of prescription drugs, relative to the prices of other goods, have risen, yet Americans buy more prescription drugs than ever. This might be because
A) with higher incomes and more older Americans, we have moved rightward along our demand curve for drugs. B) with higher incomes and more older Americans, the demand curve for prescription drugs has shifted rightward. C) more new firms entered the pharmaceutical industry each year, which caused a rightward shift in the supply curve of prescription drugs. D) Both answers A and C are correct.
The price of home computers rises. According to the law of supply, manufacturers will respond to this price increase by
A. keeping computer production steady B. decreasing computer production. C. increasing computer production. D. halting computer production.