module 4 -5

Question 1

interest rate

Answer 1

the “price” of borrowing in the financial market; a rate of return on an investmen

Question 2

minimum wage

Answer 2

a price floor that makes it illegal for an employer to pay employees less than a certain hourly rate

Question 3

usury laws

Answer 3

laws that impose an upper limit on the interest rate that lenders can charge

Question 4

elastic demand

Answer 4

when the elasticity of demand is greater than one, indicating a high responsiveness of quantity demanded or supplied to changes in price

Question 5

elastic supply

Answer 5

when the elasticity of either supply is greater than one, indicating a high responsiveness of quantity demanded or supplied to changes in price

Question 6

elasticity

Answer 6

an economics concept that measures responsiveness of one variable to changes in another variable

Question 7

inelastic supply

Answer 7

when the elasticity of supply is less than one, indicating that a 1 percent increase in price paid to the firm will result in a less than 1 percent increase in production by the firm; this indicates a low responsiveness of the firm to price increases (and vice versa if prices drop)

Question 7

elasticity of savings

Answer 7

the percentage change in the quantity of savings divided by the percentage change in interest rates

Question 8

inelastic demand

Answer 8

when the elasticity of demand is less than one, indicating that a 1 percent increase in price paid by the consumer leads to less than a 1 percent change in purchases (and vice versa); this indicates a low responsiveness by consumers to price changes

Question 9

perfect elasticity

Answer 9

see infinite elasticity

Question 9

perfect inelasticity

Answer 9

see zero elasticity

Question 9

infinite elasticity

Answer 9

the extremely elastic situation of demand or supply where quantity changes by an infinite amount in response to any change in price; horizontal in appearance

Question 10

price elasticity of supply

Answer 10

percentage change in the quantity supplied divided by the percentage change in price

Question 10

unitary elasticity

Answer 10

when the calculated elasticity is equal to one indicating that a change in the price of the good or service results in a proportional change in the quantity demanded or supplied

Question 10

price elasticity of demand

Answer 10

percentage change in the quantity demanded of a good or service divided the percentage change in price

Question 10

wage elasticity of labor supply
t

Answer 10

the percentage change in hours worked divided by the percentage change in wages

Question 10

price elasticity

Answer 10

the relationship between the percent change in price resulting in a corresponding percentage change in the quantity demanded or supplied

Question 11

zero inelasticity

Answer 11

the highly inelastic case of demand or supply in which a percentage change in price, no matter how large, results in zero change in the quantity; vertical in appearance