What type of consumer goods are most affected by the business ...

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What type of consumer goods are most affected by the business cycle: durable goods or nondurable goods? Why?
 
  What will be an ideal response?

Question 2

Refer to Figure 7-1. At the efficient equilibrium
 
  A) economic surplus is maximized. B) economic surplus is zero.
  C) economic surplus is negative. D) economic surplus is minimized.

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Answer to Question 1

Some workers lose income during a recession and cut back on their spending. Other workers fear losing their jobs or may suffer wage cuts. These workers also reduce their spending. When they cut back on their spending, workers are more likely to cut back on consumer durable goods. Consumer durable goods such as automobiles, appliances, and furniture are goods that are expected to last for three or more years. Since these goods last three or more years, the consumer can continue to use these goods for some time. The consumer will put off trying to replace these expensive goods, until his/her income position is stronger and job security more assured.

Answer to Question 2

A

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