A Price Index Is

question 252

Multiple Choice

A price index is

• A) a measurement showing how the average price of a bundle of goods changes over time.
• B) a measurement showing the cost of a bundle of goods at a point in time.
• C) a sustained increase in the overall price level.
• D) a decrease in the overall price level.

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Definitions:

Elasticity of Supply

A measure of how much the quantity supplied of a good or service changes in response to a change in price.

Factor of Production

Inputs used in the production of goods or services, typically categorized into land, labor, capital, and entrepreneurship.

Cross Elasticity of Demand

The ratio of the percentage change in quantity demanded of one good to the percentage change in the price of some other good. A positive coefficient indicates the two products are substitute goods; a negative coefficient indicates they are complementary goods.

Inferior Goods

Goods for which demand decreases as the income of the consumer increases, as they are typically replaced with more expensive alternatives.