What is the difference between elastic and inelastic demand? Use examples to explain your answer
Demand for a good is considered elastic when its quantity demanded is highly sensitive to changes in price. If the percentage change in quantity demanded is larger than the percentage change in price, consumers are very price sensitive and demand is elastic. For example, the price elasticity of demand for a luxury car is highly elastic.
Demand for a good is considered inelastic when its quantity demanded is not very sensitive to changes in price. If the percentage change in quantity demanded is smaller than the percentage change in price, consumers are not very price sensitive and demand is inelastic. For example, the price elasticity of demand for table salt is inelastic.
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Suppose that government spending increases in the Keynesian macroeconomic model. What will happen to the aggregate demand curve?
Select one: a. The entire aggregate demand curve will shift up. b. The entire aggregate demand curve will shift down. c. The aggregate demand curve will rotate clockwise. d. The aggregate demand curve will not change.
Which of the following is true?
i. When the world price of a good is lower than the price that balances domestic supply and demand, a country gains from exporting the good. ii. Compared to a no-trade situation, imports make consumers better off. iii. Quotas raise the domestic price of imported goods. A) Only i B) Only ii C) Only iii D) i and ii E) ii and iii