The cross-price elasticity of demand is measured by the
a. change in quantity demanded of one good divided by the change in price of another good
b. percentage change in quantity demanded of one good divided by the percentage change in its price
c. percentage change in demand for one good divided by the percentage change in income
d. percentage change in quantity supplied of one good divided by the percentage change in the price of another good
e. percentage change in quantity demanded of one good divided by the percentage change in price of another good
E
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The price of wheat has fallen since 1950. Which of the following explains this price decline?
A) The price elasticity of demand is less than 1 (in absolute value) and wheat is an inferior good. B) The price elasticity of demand is greater than 1 (in absolute value) and the income elasticity of demand for wheat is greater than 1. C) The price elasticity of demand is greater than 1 (in absolute value) and the income elasticity of demand for wheat is low. D) The price elasticity of demand is less than 1 (in absolute value) and the income elasticity of demand for wheat is low.
The life cycle hypothesis explains the long run constancy of the savings rate and short run variability of savings rate provided
A) the proportions of working and retired people are constant in each historical era. B) the saving behavior of each age group does not change from generation to generation. C) A and B are both required to explain the apparent contradiction. D) Friedman's PIH is in error.