As We Move Down a Linear Demand Curve,the Absolute Value

question 108

Multiple Choice

As we move down a linear demand curve,the absolute value of the price elasticity of demand:

• A)increases.
• B)stays the same.
• C)decreases.
• D)cannot be determined without more information.

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Definitions:

Nonlabor Income

Income received from sources other than direct employment or work, such as investments, pensions, or transfer payments.

Substitution Effect

The change in the quantity demanded of a good as consumers switch away from more expensive alternatives.

Income Effect

The change in consumer demand for goods and services induced by a change in consumers' discretionary income.

Labor Supply Curve

A graphical representation that shows the relationship between the wage rate and the quantity of labor workers are willing to supply.