The fiGure Depicts a Situation Where

question 209

Multiple Choice

The figure depicts a situation where

• A) prices are sticky, but output is flexible.
• B) prices are flexible, but output is constant.
• C) prices and output are both flexible.
• D) prices are sticky and output is constant.

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Definitions:

Inferior Goods

A good that has a negative income elasticity, so that as consumer income rises, the demand for the good falls.

Normal Goods

Goods for which demand increases as the income of individuals increases.

Demand Curve

A graphical representation of the relationship between the price of a good or service and the quantity demanded for a given period.

Normal Goods

Goods for which demand increases when income increases, and falls when income decreases, but price remains constant.