When the Price of a Good Increased by 6 Percent

question 113

Multiple Choice

When the price of a good increased by 6 percent, the quantity demanded of it decreased 3 percent. Most likely, this good ________ and ________.

• A)is a necessity; has poor substitutes
• B)has poor substitutes; is a luxury
• C)is a necessity; has good substitutes
• D)is a luxury; is narrowly defined
• E)is a luxury; has experienced a recent price change

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Definitions:

Labor Supply

The total hours that workers wish to work at a given wage rate, in a given time period.

Payroll Tax

Taxes levied on employers or employees, and are based on the salary or wages of employees. These taxes fund social security and healthcare programs.

Elastic

describes a condition in which the quantity demanded or supplied of a good or service is highly responsive to changes in its price.

Corporate Profits Tax

A levy imposed on the income or profit earned by corporations or analogous legal entities.