Suppose a consumer has the following rule of thumb: Regardless of how gasoline prices fluctuate, she will always buy $20 of gasoline per week and then adjust her driving patterns accordingly. We can then conclude the following:
A. Her own-price elasticity of demand is equal to -1.
B. Her income-elasticity of demand is 0.
C. Her own-price elasticity is 0.
D. Her income elasticity of demand is -1.
E. Both (a) and (b).
F. Both (a) and (d).
G. Both (c) and (d)
H. None of the above.
Answer: A
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Imagine that the economy is at a point on that is below both AA and DD, where both the output and asset markets are out of equilibrium. Which first action is TRUE?
A) The economy will stay at this level in the short run. B) The exchange rate will first rise to a point on the AA schedule. C) The exchange rate will first rise to a point on the DD schedule. D) The AA-DD equilibrium will shift to the position of the economy. E) The output level will first increase to a position on the DD schedule.
Firms serve similar functions to
A) courts. B) governments. C) markets. D) all of these choices.