Author Question: Refer to the scenario above. If they are the only bidders in the auction and each bidder bids up to ... (Read 123 times)

lracut11 · **on:** Jun 29, 2018

Refer to the scenario above. If they are the only bidders in the auction and each bidder bids up to his value for the good, the winner will earn a surplus of ________.

A) 500
B) 625
C) 125
D) 150

Question 2

What are the determinants of price elasticity of demand?

What will be an ideal response?

amanda_14 · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

C

Answer to Question 2

There are three important determinants of the price elasticity of demand. These are:
a) Closeness of substitutes: As the number of substitutes grows, the price elasticity of demand increases.
b) Budget share spent on the good: As a consumer spends more of his budget on a particular good, the good's price elasticity of demand increases.
c) Available time to adjust: The price elasticity of demand is lower for a good in the short run in comparison to the long run.