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Understanding Price Elasticity of Demand Price elasticity of demand is a measure of the responsiveness of a change in quantity demanded of a good or service to a change in its price. It is a measure of the degree of
Answer: What is an Inferior Good? An inferior good is a type of product for which demand decreases when income increases, and demand increases when income decreases. This is the opposite of a normal good, which experiences an increase in
Answer: Demand is Price Inelastic if a Small Percentage Change in Price Leads to a Large Percentage Change in Quantity Demanded Demand is price inelastic if a small percentage change in the price of a good or service leads to
Answer The correct answer is E, 1/2. The midpoint method of calculating price elasticity of demand is used when the price and quantity demanded of a product or service changes. It is calculated by taking the change in quantity demanded
Answer The correct answer is D. Demand becomes less elastic. This is because a linear downward sloping demand curve is a representation of the inverse relationship between price and quantity demanded. As price decreases, quantity demanded increases, and vice versa.
Answer: Income Elasticity Less Than Zero An income elasticity of less than zero tells us that the good is an inferior good. This means that as income increases, the demand for the good decreases. In other words, as people make
Answer The correct answer is E, both i and ii. The UAW’s bargaining for higher wages and more benefits for autoworkers led to a decrease in the supply of new automobiles due to a decrease in the quantity supplied and
Answer: The Price Elasticity of Supply The Price Elasticity of Supply (PES) is the measure of how much the quantity supplied of a good or service changes when the price of the good or service changes. The formula for PES
Answer The income elasticity of demand is positive if the good is a normal good. Explanation The income elasticity of demand is a measure of the responsiveness of demand for a good to a change in the consumer’s income. If
Answer: The Price Elasticity of Demand The price elasticity of demand is an economic measure that helps quantify the extent to which the quantity demanded of a good changes when the price of that good changes, and all other influences
Answer: Midpoint Method of Calculating a Percentage Change in Price The midpoint method of calculating a percentage change in price between two points on a demand curve is the formula used to calculate the percentage change in price of a
Answer The correct answer for the question is B. 8.46 percent. This is determined by using the price elasticity of demand, which states that a 1 percent increase in price will cause a 0.13 percent decrease in quantity demanded. By
Why is the Average Pay of London so High? London is the capital city of England and is one of the most important cities in the United Kingdom. It is a major global financial centre, and is home to a
Answer The number of moles of gas in a sample can be calculated using the ideal gas law, which states that PV = nRT, where P is the pressure, V is the volume, n is the number of moles, R
Answer: Finding Average Cost, Average Variable Cost, Average Fixed Cost and Marginal Cost The given total cost (TC) function is TC=(1/3)Q^3+7Q^2=13Q+237, where Q is the number of units produced. To find average cost (AC), average variable cost (AVC), average fixed
Answer: Which one of the following statements is correct? The correct statement is option D: Households in South Africa benefit more if the components of the wind turbines are produced locally. This is because purchasing components locally creates jobs, stimulates
Answer: Germany’s financial support of Saretec constitutes an injection to the circular flow of income and spending in the economy of South Africa. Germany’s financial support of Saretec, to finance the building of a wind turbine tower, rooftop solar panels
Answer: In the AD-AS model, the aggregate supply curve is upward sloping because it illustrates the total real output supplied at each price level. As the price level increases, total production decreases. Supporting Subsection 1: Price Level and Real Output
Answer The unemployment rate in this example is 8.7%. This is calculated by dividing the amount of unemployed people (20 000) by the total amount of people in the labor force (250 000) and then multiplying by 100. Calculating the
Answer: The unemployment rate is calculated by subtracting the number of employed people from the total labour force and dividing this number by the total labour force. In this case, the total labour force is 25 000 000, the number
Answer: Rightward Shift of the Phillips Curve The Phillips curve illustrates the relationship between inflation and unemployment. It suggests that as unemployment decreases, inflation increases, and vice versa. A rightward shift of the Phillips curve occurs when inflation increases without
Answer: Expansionary Fiscal Policy and Inflation Expansionary fiscal policy is an economic policy that involves increasing government spending or decreasing taxation in order to stimulate the economy. Ceteris paribus, this policy can result in demand-pull inflation, which is inflation caused
Answer: A Complete Business Cycle A complete business cycle is a period of time that is made up of four distinct stages: A-trough, AB-upswing, B-peak, and BC-downswing. These stages are part of an economic cycle that occurs naturally and can
Answer The correct answer is b. production method. GDP (Gross Domestic Product) is the total value of the goods and services produced in a country over a period of time. This value is usually determined by the production method which
Answer Barclays Bank announced in March 2016 that it intends to reduce its 62.3% shareholding in Barclays Africa Group Limited (BAGL) in the coming two to three years. This transaction is estimated to be worth $4.1 billion. If Barclays sells
Answer: Correct Answer: E In this simple Keynesian model, the correct answer is E. This is because when Autonomous Consumption (AC) is R20 billion, Investment Spending (IS) is R30 billion and the Marginal Propensity to Consume (MPC) is 0.55, the
Answer: Circular Flow of Income and Spending In economics, the circular flow of income and spending is a concept that models the exchange of money in an economy. It is a way of visualizing the flow of money between different
Answer: Which one of the following is most likely to increase the demand for US dollars on the South African foreign exchange market? The most likely factor to increase the demand for US dollars on the South African foreign exchange
Answer The three major flows in the economy as a whole are total spending, total income, and total production. This is because total spending, total income, and total production are the three main components of the circular flow of income
What is the Relationship Between Active Balances and the Interest Rate in the Money Market? The relationship between active balances and the interest rate in the money market is an inverse relationship. This means that when the active balances increase,
Answer: The government provides public goods and services to both households and firms. Public goods and services provided by the government include but are not limited to: healthcare, education, infrastructure, defense, and public safety. Public Goods and Services for Households
Answer: Which of the Following Are the Three Major Flows in the Economy? The three major flows in the economy as a whole are total spending, total income, and total production. These three flows are essential for understanding the overall
Answer: An Indirect Tax such as Value-Added Tax is Regressive An indirect tax such as value-added tax is regressive, meaning that the percentage of income which rich people pay towards taxes is higher than the percentage of income which poor
Answer: The Commercial Bank’s Ability to Create Money is Decreased When the SARB Increases the Reserve Requirement Ratio The commercial bank’s ability to create money is decreased when the South African Reserve Bank (SARB) increases the reserve requirement ratio. The
Answer: Increase in rand price of a foreign currency The increase in the rand price of a foreign currency usually benefits South African importers and exporters. The rand is the official currency of South Africa, and its price is determined
Answer In the circular flow of income and spending, exports, investment, savings, imports, and taxes are important factors. Exports are leakages from the circular flow, while investment is a leakage from the circular flow. Savings, imports, and taxes are injections
Answer: Comparative Advantage Comparative advantage is an economic theory that suggests two countries can benefit from trade even if one country is more efficient in producing everything. This concept was introduced by Adam Smith in 1776 and is based on
Rewards of the Factors of Production The rewards of the factors of production are the various payments and/or economic benefits that are given in exchange for the use of the factors of production. The four main factors of production are
Answer The correct answer is option E: c and d. Country B has an absolute advantage in both maize and bananas, while Country A has a relative advantage in the production of bananas. Explanation Absolute advantage is the ability of
Answer: Nationalisation vs. Privatisation Nationalisation is the process of a government taking control of a company or industry, while privatisation is the process of transferring ownership from the government to the private sector. Arguments in favour of Privatisation One of