What makes the demand for some goods elastic and the demand for other goods inelastic?
What will be an ideal response?
The magnitude of the price elasticity of demand for a good depends on three main influences:
• Closeness of substitutes. The more easily people can substitute other items for a particular good, the larger is the price elasticity of demand for that good.
• The proportion of income spent on the good. The larger the portion of the consumer's budget being spent on a good, the greater is the price elasticity of demand for that good.
• The time elapsed since a price change. Usually, the more time that has passed after a price change, the greater is the price elasticity of demand for a good.
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According to classical economists, the government should increase government purchases when
A) the benefits of the spending exceed the costs. B) the economy is in a recession. C) the economy is likely to go into a recession in the next six months to a year. D) inflation is lower than its targeted level.
The margin requirement is the maximum percentage of the price of a(n)
a. bond that can be used as collateral to borrow from a bank b. investment good that can be used as collateral to borrow from a bank c. home mortgage that can be used as collateral to borrow from a bank d. stock that can be used as collateral to borrow from a bank e. an asset that can be used as collateral to borrow from the Fed