Explain how expectations affect consumption
What will be an ideal response?
Expectations affect consumption in two ways. First, expectations affect consumption directly through human wealth: To compute their human wealth, consumers have to form their own expectations about future labor income, real interest rates, and taxes. Second, expectations affect consumption indirectly, through nonhuman wealth-stocks, bonds and housing: The prices of these assets depend on expectations of future cash flows and interest rates.
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Which of the following statements is correct?
A) Monopolies are guaranteed to earn an economic profit. B) The market demand and the firm's demand are the same for a monopoly. C) Monopolies have perfectly inelastic demand for the product sold. D) Because a monopoly is the only firm in the market, its supply curve is the same as the market demand curve. E) Because a monopoly is the only firm in the market, its marginal revenue curve must be the same as the market demand curve.
Cross-price elasticity measures the responsiveness of the price of good A to a change in the price of good B
a. True b. False