Which of the following would unambiguously increase consumption spending?
a. an increase in real disposable income coupled with a decrease in real wealth
b. an increase in real wealth coupled with more pessimistic expectations regarding future income
c. a decrease in real disposable income coupled with a decrease in the interest rate
d. a decrease in the interest rate coupled with an increase in real wealth
e. increased pessimism regarding future income coupled with an increase in the interest rate
D
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Jill Borts believes that the price elasticity of demand for her economics textbook is relatively inelastic. She argues "I was told I had to purchase a book written by Hubbard and O'Brien that is required by my instructor
If I wanted to buy a mystery novel I would have many authors to choose from. Therefore, the demand for mystery novels is more elastic than the demand for my textbook." Is Jill correct? A) She is correct that the textbook has a more inelastic demand, but that is because most students pay for their textbooks with credit cards. Most people pay for novels and other books with debit cards. B) She is correct. C) She is confused. She should have concluded that the textbook has a more elastic demand than a novel. D) The demand for the textbook is more inelastic, but Jill's reasoning is incorrect. The reason the textbook has an inelastic demand is that it is more expensive than any novel.
A production possibilities frontier can shift inward if there is
a. an increase in the unemployment rate b. mandatory retirement at age 55 c. an improvement in technology d. a larger work force e. a larger capital stock