When comparing elasticities between two different linear demand curves, the curve that is flatter has greater price elasticity at every given price
Indicate whether the statement is true or false
False. This statement confuses slope with elasticity. Elasticity is calculated by multiplying the slope times (p/Q). As a result, the vertical intercept (along the price axis) is the key to elasticity. The curve with the lower intercept will be more price elastic at every given price.
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The Laffer curve
A) initially slopes upward as increasing tax rates lead to increasing tax revenue but eventually will slope downward as increasing tax rates lead to decreasing tax revenue. B) slopes upward throughout its range since increasing tax rates will always lead to increases in tax revenue. C) is horizontal because tax revenue is independent of the rate of interest. D) slopes downward throughout its range since increasing tax rates will always lead to decreases in tax revenue.
Refer to Table 5.1, which shows Madeline's preference ranking for various consumption bundles of bread and soup, where 1 represents her first choice, 2 her second, and so on. If the price of soup is $3 per bowl, the price of bread is $3 per loaf and Madeline's income is $9 per day, which combination of bread and soup will she choose?
A. 2 loaves of bread and 1 bowl of soup
B. 1 loaf of bread and 2 bowls of soup
C. 3 loaves of bread and 0 bowls of soup
D. 0 loaves of bread and 3 bowls of soup