Use the Following General Linear Demand Relation: Where M

question 45

Multiple Choice

Use the following general linear demand relation: where M is income and is the price of a related good,R.If M = $15,000 and = $20 and the supply function is ,then,when the price of the good is $60,

• A)there is a shortage of 60 units of the good.
• B)there is equilibrium in the market.
• C)there is a surplus of 60 units of the good.
• D)the quantities demanded and supplied are indeterminate.

---

Definitions:

Purchasing Power

The capability of a currency to buy goods or services, expressed as the quantity one unit can acquire.

Inflation

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

Hourly Wage

The rate of pay per hour for employment, used to calculate total earnings based on the number of hours worked.

Rates of Inflation

The percentage rate at which the general level of prices for goods and services is rising.