If the Price of Capital Declines, the Consequent Output Effect

question 164

Multiple Choice

If the price of capital declines, the consequent output effect would be

• A)greater, the more elastic the demand for the product.
• B)greater, the less elastic the demand for the product.
• C)negative.
• D)of consequence only if capital and labor are used in fixed proportions.

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Definitions:

Current Year

The present calendar year in which a transaction or event occurs or is being discussed.

Laspeyres Price Index

An economic measure that calculates the change in the price of a basket of goods and services, using the quantities purchased in the base year as weights.

Per Capita Income

The average income earned per person in a given area or country.

Revealed Preferences

The concept that consumers' choices reveal their preferences and that these choices can be used to infer the utility they derive from different options.