Consider a Medical Breakthrough That Led to the Discovery of a Simple

question 68

Multiple Choice

Consider a medical breakthrough that led to the discovery of a simple microchip which when inserted inside the human ear could prevent certain chronic diseases.The price elasticity of demand for that microchip would most likely be _____.

• A)very elastic
• B)very inelastic
• C)infinite
• D)negative only for high prices
• E)positive only for high prices

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Definitions:

Inflation Rate

The rate at which the general level of prices for goods and services is rising, hence, eroding purchasing power.

Real Rate of Return

The rate of return on an investment after adjusting for inflation, showing the actual increase in purchasing power.

Real Rate

The interest rate adjusted for inflation, representing the real cost of borrowing or the real yield on an investment.

Expected Inflation

The rate at which it is forecasted that the general level of prices for goods and services will rise over a period of time.