Author Question: If the demand curve for a life-saving medicine is perfectly inelastic, a reduction in supply will ... (Read 53 times)

DyllonKazuo · **on:** Jun 30, 2018

If the demand curve for a life-saving medicine is perfectly inelastic, a reduction in supply will cause the equilibrium price to:
a. rise and the equilibrium quantity to fall.
b. rise and the equilibrium quantity to stay the same.
c. rise and the equilibrium quantity to rise.
d. stay the same and the equilibrium quantity to fall.

Question 2

Explain Gresham's Law.

asdfghjkl; · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

b

Answer to Question 2

When there are two forms of money available, people prefer to spend the form of money that is less valuable. Thereby giving rise to the phrase Cheap money drives out dear money. For instance if there is paper money and silver coins, it is more likely that individuals will hoard the silver coins hoping that the value of them will increase. In this instance the paper money is the cheap money.