Explain how we "read" the three graphs in Figs. A1.1 and A1.2
What will be an ideal response?
The points in the graphs relate the quantity of the variable measured on the one axis to the quantity of the variable measured on the other axis. The quantity of the variable measured on the horizontal axis (the x-axis) is measured by the horizontal distance from the origin to the point. Similarly, the quantity of the variable measured on the vertical axis (the y-axis) is measured by the vertical distance from the origin to the point. The point relates these two quantities. For instance, in Figure A1.2a, point A shows that at a price of $1.37 per song, 3.8 million songs are downloaded.
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If the per capita income of a country is growing at 3.5 percent per year, approximately how long will it take for that income to double?
a. 20 years b. 25 years c. 35 years d. 70 years
Using indifference curve analysis, an optimum is characterized by
A) the marginal rate of substitution of one good divided by its price equal to the marginal rate of substitution of the other good divided by its price. B) the marginal rate of substitution being equal to one. C) the marginal rate of substitution being equal to zero. D) the marginal rate of substitution being equal to the ratio of the prices of the two goods.