Wiley Mock 1

Question 1

If the price elasticity of demand for a product is inelastic

Answer 1

If sales are inelastic, the percent change in sales is less than the percent change in price, so the price change will have a greater impact on total expenditures than the quantity change. This means that the price and total expenditures on the product will move in the same direction.

Question 2

Marshall-Lerner condition

Answer 2

Importer Market + Domestic Market < 1 will a depreciation of the currency will move the trade balance into deficit; the increase in exports is insufficient to offset the increase in imports.