Question 1: If the fall percentage increase in the quantity of a commodity deman
ID: 1152190 • Letter: Q
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Question 1: If the fall percentage increase in the quantity of a commodity demanded is smaller than the percentage in its price, the absolute value of price elasticity of demand is: A. Greater than Equal to 1 ? Smaller than 1 In Elo s D. Zero Question 2: the consumer surplus If the price of a pizza increases and everything else remains the same, then from pizza will- . B. Decrease C. Equal the producer surplus if the market produces the efficient quantity of pizza D. Remain the same Question 3 If we are on the inelastic portion of a linear demand curve, a decrease in price. total revenue. Decreases B. Increases C. Does not change D. Any of the above Au Question 4: A market is under-producing, compared to what is economically efficient, if for the last unit: A MB MC B. MC>MB D. None of the aboveExplanation / Answer
Ans1) c is the correct option. Smaller than 1. Price elasticity of demand is equal to percentage change in quantity demanded divided by percentage change in price. So if the change in numerator is smaller than the denominator then the absolute elasticity of demand will smaller than 1
Ans2) b is the correct option. Decrease. Consumer surplus is the area above the price and below the demand curve. So with increased price the area of consumer surplus decreases.
Ans3) a is the correct option. Decreases. on the inelastic portion of demand curve, change in price does not have much effect on total revenue because change in price will not lead to change in quantity. Total revenue is equal to price multipled by quantity meaning lower price with the same quantity decreases the total revenue.
Ans4) a is the correct option. MB>MC. When marginal benefit exceeds the marginal cost that means the resources are not fully utilized and the market is not economically efficient and under producing the good.
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