Author Question: The price of a new toy increases from 5 to 7 and the quantity demanded decreases from 12,000 to ... (Read 172 times)

jjjetplane · **on:** Jun 30, 2018

The price of a new toy increases from 5 to 7 and the quantity demanded decreases from 12,000 to 6,000 per month as a result. Based on this information, the price elasticity of demand (in absolute terms) is estimated to be equal to:
a. 0.5, indicating relatively elastic demand.
b. 0.5, indicating relatively inelastic demand.
c. 2.0, indicating relatively elastic demand.
d. 2.0, indicating relatively inelastic demand.

Question 2

Suppose you found 10,000 hidden under a rock and deposited it in a demand deposit account at your bank. If the reserve requirement was 10 percent, your deposit would initially add ____ to total demand deposits and over time increase the money supply by a maximum of ____.
a. 10,000; 100,000
b. 10,000; 90,000
c. 1,000; 90,000
d. 1,000; 9,000