If the price elasticity of demand for a good is inelastic, a price change causes:
A. an infinite change in quantity demanded.
B. a zero change in quantity demanded.
C. a more than proportionate change in quantity demanded.
D. a less than proportionate change in quantity demanded.
Answer: D
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A bank manager advises all of his loan officers that the average cost of funds for the bank over the past year has been 6%. The bank has borrowed $1 million at 5%, another $1 million at 6% and another $1 million at 7%
Future borrowing costs are expected to continue at 7%. The manager however, instructs his loan officers that they are authorized to make loans at interest rates that are equal to or greater than the bank's average cost of borrowing. How would you evaluate the bank manager's decision?
Which of the following will reduce the supply of motorcycles?
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