a. one percent; increase; 1.50 units b. one unit; increase; 1.50 units c. one pe
ID: 1093622 • Letter: A
Question
a. one percent; increase; 1.50 units
b. one unit; increase; 1.50 units
c. one percent; decrease; 1.50 percent
d. one unit; decrease; 1.50 percent
e. ten percent; increase; fifteen percent
a. The greater the number of substitute goods, the more price elastic the demand for the product.
b. The demand for durable goods tends to be more price elastic than the demand for nondurables.
c. The demand for relatively low-priced goods tends to be more price elastic than the demand for expensive items.
d. a and b only
e. a, b, and c
a. 0.50, Substitutes
b. 0.45, Substitutes
c. 0.45, Complements
d. .50, Complements
e. Products are not related
b. level of competitor advertising
c. consumer income level
d. consumer desires for goods and services
e. a and b
Explanation / Answer
a. one percent; increase; 1.50 units
b. one unit; increase; 1.50 units
c. one percent; decrease; 1.50 percent
d. one unit; decrease; 1.50 percent
e. ten percent; increase; fifteen percent
a. The greater the number of substitute goods, the more price elastic the demand for the product.
b. The demand for durable goods tends to be more price elastic than the demand for nondurables.
c. The demand for relatively low-priced goods tends to be more price elastic than the demand for expensive items.
d. a and b only
e. a, b, and c
R : Expensive items tend to be more durable goods and low-priced goods tend to be not as durable so if you refer to statement b, it basically tells you that realtionship. A,B only is your answer
a. 0.50, Substitutes
b. 0.45, Substitutes
c. 0.45, Complements
d. .50, Complements
e. Products are not related
R:
Cross Price Elasticity of Demand = (% change in Q demanded for goods A) / (% change in Price change for goods B)
% change in Q demanded for goods A = (600-500)/500 = 0.2
(% change in Price change for goods B) = (1.50-1)/1 = 0.5
Cross Price Elasticity of Demand = 0.2/0.5 = 0.4 (positive = substitutes)
a. Not enough Information
b. $8
c. $88
d. $42
e. $68
R:
formula between Price elasticity of demand and Marginal Revenue:
MR = P * [ ( 1 + E ) / ( E ) ]
15 = P*[(1-1.2)/-1.2)]
15 = P/6
P = 15*6 = 90 (non of the above)
a. For a 1% increase in price, quantity demanded falls by 2.1%
b. For a 1% increase in price, quantity demanded increases by .62%.
c. For a 1% decrease in price, quantity demanded increases by 2.72%
d. None of the above
R : non of the above. This is because the income elasticity of demand is not the same at every point of the demand curve. For example, when income is high, people are less sensitive to the income of their goods as compared to the income when low.
1.. An increase in each of the following factors would normally provide a subsequent increase in demand, except: a. price of substitute goodsb. level of competitor advertising
c. consumer income level
d. consumer desires for goods and services
e. a and b
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