What kind of elasticity is relevant when you are trying to figure out how a price cut by the burger shop next door will affect the demand for your pizza? Explain
What will be an ideal response?
The cross elasticity of demand is the relevant elasticity. It is a measure of the responsiveness of the demand for a good to a change in the price of a related good. In the case in question, the required elasticity is the cross elasticity of demand for pizza with respect to the price of a burger.
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Banks are exposed to interest rate risk primarily because
A) interest rates are very difficult to forecast. B) the maturities of banks' assets and liabilities differ. C) borrowers from banks are prone to default. D) depositors are always searching for a slightly higher interest rate.
The Lorenz curve is criticized for all of the following EXCEPT
A) that it excludes transfers-in-kind income. B) that it does not account for the size differences of households. C) that it does not account for age differences of households. D) that it does not account for the impact of trade on the standard of living.