(Solved) The price of a phone call at a pay phone was 5 cents in 1950 and the price of a first-class stamp ...

Question 1.

The law of demand tells us that people will buy less of a good if

• the price of that good increases.

• every factor that can affect people's buying decisions changes.

• people's income decreases.

• the prices of other goods increase.

Question 2.

The price of a phone call at a pay phone was 5 cents in 1950 and the price of a first-class stamp was 3 cents. In 2016, the pay phone costs 50 cents for a call and a first-class stamp costs 47 cents. We know that

• all prices increased from 1950 to 2016: Nominal prices of phone calls, first-class stamps, and the relative prices of phone calls and first-class stamps.

• both the nominal prices of phone calls and first-class stamps increased from 1950 to 2016, but the relative price of stamps increased and the relative price of phone calls decreased from 1950 to 2016.

• both the nominal prices of phone calls and first-class stamps increased from 1950 to 2016, but we can't tell if the relative prices increased or decreased without more information.

• both the nominal and the relative price of phone calls increased from 1950 to 2016.

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The price of a phone call at a pay phone was 5 cents in 1950 and the price of a first-class stamp ...

Economics Today: The Micro View

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