Explain why most indifference curves are convex
What will be an ideal response?
Diminishing marginal rates of substitution make most indifference curves convex. When people have a lot of one good, they are willing to give up a relatively larger amount of it to get a good of which they have relatively little.
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If the price elasticity of demand is 0.5, then a 10% increase in price results in a
A) 5% decrease in total revenues. B) 5% decrease in quantity demanded. C) 0.5% decrease in quantity demanded. D) 5% increase in quantity demanded. E) 50% reduction in quantity demanded.
Which of the following theorems predicts that trade benefits the abundant factors of a country and harms the scarce factors?
A) The Stolper-Samuelson theorem. B) The Rybczynski theorem. C) The Heckscher-Ohlin theorem. D) None of the above.