A decrease in the price of eggs from 1.50 to 1.30 per dozen resulted in an increase in egg purchases in two cities.
In Philadelphia, daily egg purchases increased from 6000 to 8000 dozens; in nearby Dover, Delaware, daily egg purchases increased from 300 to 400 dozens. The price elasticity of demand is therefore A) lower in the smaller city as would be expected.
B) greater in the smaller city as would be expected.
C) certainly affected by population differences in different markets.
D) the same in Philadelphia as in Dover.
Question 2
With everything else the same, which of the following would increase the demand for U.S. dollars in the foreign exchange market?
I. a rise in the U.S. interest rate
II. a fall in interest rates in foreign countries
III. a rise in the expected future exchange rate
A) I only
B) I and II only
C) I and III only
D) I, II, and III
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