Which of the following is correct?
A. If the demand for a product is inelastic, a change in price will cause total revenue to
change in the opposite direction.
B. If the demand for a product is inelastic, a change in price will cause total revenue to
change in the same direction.
C. If the demand for a product is inelastic, a change in price may cause total revenue to
change in either the opposite or the same direction.
D. The price elasticity coefficient applies to demand, but not to supply.
Answer: B
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Consider a regression with two variables, in which X1i is the variable of interest and X2i is the control variable. Conditional mean independence requires
A) E(ui|X1i, X2i) = E(ui|X2i) B) E(ui|X1i, X2i) = E(ui|X1i) C) E(ui|X1i) = E(ui|X2i) D) E(ui) = E(ui|X2i)
Why is the demand for foreign currencies known as a derived demand?