During October and November 2008, gasoline prices were falling dramatically making travel by car less expensive but air travel prices were as high as ever
If travel by car is less expensive, and income remains the same, describe the substitution and income effects that occur for travelling by car. A) If travelling by car is a normal good, the substitution effect would cause an increase and the income effect would cause a decrease in travelling by car.
B) If travelling by car is a normal good, both the substitution and income effects would be cause an increase in travelling by car.
C) If travelling by car is a normal good, the substitution effect would cause a decrease and the income effect would cause an increase in travelling by car.
D) If travelling by car is a normal good, both the substitution and income effects would cause a decrease in travelling by car.
B
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In the figure above, production efficiency occurs at ________, and allocative efficiency occurs at ________
A) all points on the PPF; only one point on the PPF B) only one point on the PPF; all points on the PPF C) only one point on the PPF; only one point on the PPF D) all points on the PPF; all points on the PPF E) all points on the PPF; all points above the PPF
Inelastic demand implies
A) that a one percent increase in price results in a smaller than one percent decrease in quantity demanded. B) that a one percent increase in price results in a larger than one percent decrease in quantity demanded. C) that a one percent cut in price results in a larger than one percent increase in quantity demanded. D) that a one percent decrease or increase in price induces no change in total revenue.