Question

QUESTION 17

1. How might department stores best protect themselves against the risk of recession?

   		Buy more department stores.
   		Stand ready to go out of business if a recession occurs.
   		Sell goods that are complements to one another.
   		Sell both normal and inferior goods.

QUESTION 18

1. If I decide to make an investment in housing because my two brothers also bought houses, what is that an example of?

   		Snob effect
   		Information cascade
   		Elastic demand
   		Inelastic demand

Answer 1

17. Sell both normal and inferior goods

Reason: By selling inferior goods, during times of recession, when consumer income falls, then demand for inferior goods will rise, keeping department stores floating and they would not face a fall in demand.

18. Information cascade

Reason: Under this, demand for a good increases as more people go for it