If a Small Percentage Increase in the Price of a Good

question 198

Multiple Choice

If a small percentage increase in the price of a good results in a rather large percentage reduction in the quantity demanded of the good, demand is said to be

• A) vertical.
• B) relatively inelastic.
• C) relatively elastic.
• D) robust.

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Definitions:

Consumption Function

An economic formula that expresses the relationship between total consumption and gross national income.

Price Level

An index that measures the average of prices for goods and services in an economy over a period, often used to assess inflation or deflation.

Disposable Income

The leftover money for households to use in savings and for buying things, once income taxes have been considered.

Consumption Function

An economic formula that represents the relationship between total consumption and gross national income, indicating how changes in income affect spending.