If a Small Percentage Decrease in the Price of Chocolate

question 459

Multiple Choice

If a small percentage decrease in the price of chocolate causes a larger percentage decrease in the quantity supplied, the

• A) demand for chocolate is elastic.
• B) demand for chocolate is inelastic.
• C) supply of chocolate is elastic.
• D) supply of chocolate is inelastic.

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Definitions:

Commercial Banks

Commercial banks are financial institutions that accept deposits, offer checking account services, and make loans to individuals and businesses.

Reserve Requirements

Regulations set by central banks determining the minimum amount of reserves that must be held by a commercial bank.

Checkable Deposit Liabilities

These are bank account deposits that are immediately available to make payments and transfers, typically seen in checking accounts.

Excess Reserves

Funds that banks hold over and above the required minimum reserves set by the central bank, available for lending or investment.