For food, the price elasticity of demand is high. For food, the income elasticity of demand is high. Both of the preceding statements are accurate. None of the preceding statements is accurate. When income doubles, consumers buy 10 percent more of a good.
Inflation is a more serious problem than unemployment.
The unemployment rate is too high. The unemployment rate will be higher this year than it was in 1998. The government should try to eliminate inflation. Suppose Congress passes a tax that raises the price of cigarettes by 10 percent per pack. Answer the next two questions using the following diagram.