Tara Buys Four Music Cassettes When the Price Is $10

question 213

Multiple Choice

Tara buys four music cassettes when the price is $10 and two cassettes when the price is $14. Her price elasticity of demand is:

• A) 0.
• B) 1.
• C) 2.
• D) 3.
• E) 4.

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Definitions:

Private Saving

The portion of individual or household income that is not spent on consumption but saved for future use.

Private Investment

The expenditure by businesses on capital goods, such as machinery and buildings, and changes in inventories.

Crowding-Out Effect

A situation where increased government spending leads to a reduction in private sector investment.

Fiscal Policy

The use of government spending and taxation to influence the economy.