Suppose Two Goods Are Perfect Substitutes

question 335

Multiple Choice

Suppose two goods are perfect substitutes. The price elasticity of demand of one of the goods is

• A) 0.
• B) 1.
• C) 1000.
• D) infinity.

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Definitions:

Picketing

Occurs when workers representing the union march at the entrance to the employer’s facility with signs explaining their reasons for striking.

Price Floor

A government- or authority-imposed price control or limit on how low a price can be charged for a product.

Effective Price Floor

A government-imposed price control above the equilibrium price, intended to ensure producers receive a minimum price higher than what the market would naturally dictate.

Surplus

A scenario in which the supply of a particular good or service surpasses its demand at the existing market price.