Question

1-When the price of fresh fish increases 10%, quantity demanded is unchanged. The price elasticity of demand for fresh fish is

2-When central banks reduce the discount rate why overall interest rates decrease as well?

Answer 1

1)Price increases by 10% and quantity demanded is unchanged.

Elasticity = Change in demand/Change in price

Elasticity of demand= 0/10 = 0

2) When the central banks reduce the discount rate, the interest rates decrease as well because the bank passes the savings to the consumers of the bank. Since the bank has higher savings due to reduced discount rates, they pass on the benefit to the consumers by offering them lower interest rates on their borrowings.

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