The cross elasticity of demand is a measure of how
A) responsive consumers are to changes in the price of a product.
B) responsive suppliers are to changes in the price of a product.
C) demand for a product changes when the price of a substitute or complement changes.
D) total revenue changes when the price of a product changes.
E) demand for a product changes when income changes.
C
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Suppose an economy has the following production function: Y = A × K1/4 × H3/4. Which of the following is true of this economy?
A) Production in this economy exhibits increasing returns to scale. B) Production in this economy exhibits decreasing returns to scale C) Production in this economy exhibits constant returns to scale. D) Production in this economy decreases when the price level increase.
If nominal interest rates have a lower bound of zero and deflation occurs at 3% (i.e., the inflation rate equals -3%, then the lowest real interest rate possible is
A) -3%. B) 0%. C) 3%. D) 6%.