If a Good Has an Elasticity of Demand Equal to 1

question 133

Multiple Choice

If a good has an elasticity of demand equal to 1, then demand for the good is

• A) highly inelastic.
• B) unitary elastic.
• C) not elastic.
• D) highly elastic.

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Definitions:

Moral-Hazard Problem

A situation where one party engages in risky behavior knowing that it is protected against the consequences, often because another party bears the cost of those actions.

Moral-Hazard Problem

The moral-hazard problem arises in situations where one party's willingness to take risks is increased because the negative consequences of those risks will be borne by another party.

Principal-Agent Problem

A dilemma in economics where one party (agent) is supposed to act in the best interest of another (principal) but may have a tendency to act in their own interest.

Asymmetric Information

A situation in which one party in a transaction has more or superior information compared to the other.