Suppose the income elasticity of demand for furniture is 3, and the income elasticity of demand for physician services is 0.3. A recession occurs in the global economy that reduces all consumers' incomes by 10%. Which of the following statements accurately describe the effect of the recession? Check all that apply. Purchases of furniture increase by 30%. Purchases of physician services decrease by 3%. Purchases of furniture decrease by 30%. Purchases of furniture decrease by 3%. O O O O
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- Suppose the income elasticity of demand for furniture is 3 and the income elasticity of demand for physician services is 0.3. Compare the impact on furniture and physician services of a recession that reduces consumer income by 10%.When calculating the price elasticity of demand, which of the following conditions must be satisfied? Prices of related goods must be held constant but all other factors must be allowed to vary. All other factors that influence demand must be held constant. All other factors than influence demand must be allowed to vary. Prices of related goods must be allowed to vary but all other factors must be held constant. Which of the following would have the greatest positive impact on a country's domestic economy? An increase in spending on imports from other countries. An increase in spending by foreigners on the country's exports. A decrease in the incomes of consumers in foreign countries. A decrease in the confidence of foreign investors in the country's economy. Assume the firms in a perfectly competitive market are initially incurring economic losses. An increase in supply would cause existing firms' economic losses to decrease. True OR False?One practical reason that economists use percentages to measure elasticity is: Group of answer choices: that more complicated calculations tend to be more accurate. to be able to compare characteristics of unrelated products. to convert elasticities to dollar units. to convert units to the metric system.
- Which of the following goods (with their respective income-elasticity coefficients in parentheses) will most likely suffer a decline in demand during a recession? Dinner at a nice restaurant (+1.8) Chicken purchased at the grocery store for preparation at ome(+0.25) Facial tissue (+0.6) Plasma-screen and LCD TVs (+4.2)Imagine you are a bank manager. Currently, your bank holds $3 million in deposits at a 3% interest rate. However, you need to increase the total deposits to $6 million. The interest rate elasticity of savings is 1.70. What interest rate should you offer to depositors to obtain the required amount, all other things being equal? Use the midpoint method and round to two decimal places throughout your calculations.Question 21.21. Which of the following goods (with their respective income-elasticity coefficients in parentheses) will most likely suffer a decline in demand during a recession? Dinner at a nice restaurant (+1.8) Chicken purchased at the grocery store for preparation at home (+0.25) Facial tissue (+0.6) Plasma-screen and LCD TVs (+4.2)
- Potential health benefits of eating organic versus non-organic food have been often discussed in mass media. Though the scientific evidence of such benefits remains inconclusive, many consumers would consider switching to organic food; however, it is priced considerably higher. It can be projected that if the overall price level of organic foods goes down substantially, the demand for non-organic foods will decrease. True FalseSuppose a firm has estimated the price elasticities of demand for the two goods it offers in its store (good Y and Z). The price elasticities of demand for good Y and Z are 0.5 and 2.5 respectively. How would you characterize the two goods in terms of consumer’s preferences? Which one of them would face higher demand during economic recession?consider public policy aimed at smoking. Studies indicate that the price elasticity of demand for cigarettes is about 0.4. If a pack of cigarettes currently cost $5 and the government wants to reduce smoking by 20%, it should increase the price by what %? If the government permanently increases the price of cigarettes, the effect on smoking 1 year from now will be blank than the effect 3 months from now. Studies also find that teenagers have a higher price
- Elasticity of demand has an effective role in the decisions of business firms. Moreover, Government rules and regulations also get affected by the change in prices of these businesses. The elasticity demand concept effectively influences devaluation and depreciation of acurrency on the export earnings of the country. It is of utmost importance that the business firms take elasticity of demand into consideration. With the increase in the elasticity of demand, the consumption behavior of the consumers alsoQuestion 24 During a recession, governments may have to sometimes step in and help businesses with: None of the suggested options Positive and high income elasticity coefficients Negative income elasticity coefficients Positive but low income elasticity coefficientsExamine the following statement and determine the accuracy of the statement. Cars are considered as luxury items. Thus, a decrease in the consumer's income would result in a decrease in the demand for cars. Consumer income will affect the demand for a product. The future expectancy of a product will affect the demand for the product. Future expectancy not only encompasses the future price of a product but also other factors that will affect the demand for product such as advancement in technology and government policy.