Customers often complain about the high price of accessories for their cell phone including batteries, chargers and head sets. Often these items can cost even more than the price of the phone
Explain using price elasticity why this might be the case.
Once you have purchased a cell phone you are likely to have a more price inelastic demand for the accessories. Even though it would be nice to shop around the accessories of the competitors products are typically not interchangeable and in any event you likely have a two-year contract with your service provider that makes shopping around unattractive.
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Suppose a person calculates his permanent income by adaptive expectations. Last year's permanent income was 54,000, this year's actual income is 44,000, j = 0.20, and k = 0.82. What is his consumption expenditure this year?
A) 34,840 B) 43,472 C) 36,784 D) 42,640 E) 37,720
If the nominal interest rate is less than the real interest rate, we know that
A) both the nominal or real interest rate must be negative. B) the nominal interest rate must be equal to expected inflation. C) expected deflation must be occurring. D) expected inflation must be positive. E) expected inflation must be zero.