A theory asserts that consumers will purchase less of a good at higher prices than they will at lower prices, ceteris paribus. However, when the average price of cars increased throughout the 1990s, more cars were purchased. Which of the following best explains the apparent conflict between theory and data?
a. The ceteris paribus assumption is valid
b. It is likely that variables other than the price and quantity of cars demanded were changing.
c. The theory is valid. However, the price and quantity data gathered by researchers was clearly measured incorrectly.
d. The theory must be invalid.
b
Economics
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One of the possible consequences of the expenditure schedule lying below the level of full employment GDP is
a. unemployment. b. rising prices. c. increasing production. d. decreasing inventories.
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