Suppose You Learn That in 1,900, Households Spent About 40

question 23

Multiple Choice

Suppose you learn that in 1,900, households spent about 40 percent of their budget on food, and today, they spend about 10 percent of their budget of food. All else equal, this suggests that the price elasticity of demand for food:

• A)is probably negative.
• B)has always been very high.
• C)is probably lower now than it was in 1,900.
• D)is probably higher now than it was in 1,900.

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Definitions:

Failing Business

A business that is unable to continue operating due to financial difficulties, leading to bankruptcy or liquidation.

Economic Failures

Situations where market outcomes lead to inefficiency, often resulting in resources not being allocated optimally.

Commercial Failures

Situations where businesses are unable to continue operations due to financial problems, often leading to bankruptcy or liquidation.

Golden Parachutes

Large financial compensation packages awarded to top executives if they are forced out of a company due to a takeover or merger, intended to discourage hostile takeovers.