When the price of a movie ticket falls from $14 to $10, the quantity of tickets demanded increases from 500 to 700 a day. What is the price elasticity of demand for movie tickets? (Use the midpoint method.)
What will be an ideal response?
The price elasticity of demand = (percentage change in the quantity demanded) ÷ (percentage change in the price). Using the midpoint method to calculate the percentages, the percentage change in the quantity demanded = (700 - 500 ) ÷ (600 ) × 100 = 33.3 percent and the percentage change in the price is ($10 - $14 ) ÷ ($12 ) = -33.3 percent. We ignore the negative sign so that the price elasticity of demand equals (33.3 percent) ÷ (33.3 percent), or 1.00.
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If the exchange rate is 8 Moroccan dirhams per U.S. dollars, a crate of oranges costs 400 dirhams in the Moroccan capital of Rabat, and a similar crate of oranges in Miami sells for $55 dollars, then
a. the real exchange rate is greater than one and arbitrageurs could profit by buying oranges in the U.S. and selling them in Morocco. b. the real exchange rate is greater than one and arbitrageurs could profit by buying oranges in Morocco and selling them in the U.S. c. the real exchange rate is less than one and arbitrageurs could profit by buying oranges in the U.S. and selling them in Morocco. d. the real exchange rate is less than one and arbitrageurs could profit by buying oranges in Morocco and selling them in the U.S.
A lender need not be penalized by inflation if the:
A. long-term rate of inflation is less than the short-term rate of inflation. B. short-term rate of inflation is less than the long-term rate of inflation. C. lender correctly anticipates inflation and increases the nominal interest rate accordingly. D. inflation is unanticipated by both borrower and lender.