Exhibit 8-2 Consumption Function

question 56

Multiple Choice

Exhibit 8-2 Consumption function

As shown in Exhibit 8-2, dissaving occurs:

• A) at $5 trillion.
• B) between 0 and $4 trillion.
• C) where disposable income is greater than $4 trillion.
• D) at $8 trillion.

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Definitions:

Elastic

Describes a situation where the quantity demanded or supplied of a good responds significantly to changes in its price.

Patent

A legal right granted by a government to an inventor, giving exclusive rights to use, make, and sell an invention for a certain period of time.

Inelastic Demand

A situation in which the demand for a product does not increase or decrease significantly when the price changes.

Monopoly Power

Monopoly power denotes the extent to which a firm can set the price for its product above marginal cost due to the lack of competition in its market.