Multiple Choice QUESTION 13 A brand of dress shoes was put on sale for 20% off.
ID: 2439074 • Letter: M
Question
Multiple Choice
QUESTION 13
A brand of dress shoes was put on sale for 20% off. This led to an increase of sale by 15%. The price elasticity of demand for this product is
1.
relatively elastic
2.
relatively inelastic
3.
unitary elastic
4.
perfectly inelastic
QUESTION 14
The concept of cross-price elasticity is used to examine the responsiveness of demand
1.
to changes in income
2.
for one product to changes in the price of another
3.
to changes in "own" price
4.
to changes in income
QUESTION 15
if the cross-price elasticity Ex,y =3
1.
demand of y rises by 3% with a 1% increase in the price of X
2.
the quantity demanded of X rises by 3% with a 1% decrease in the price of X
3.
the quantity demanded of y rises by 1% with a 3% increase in the price of y
4.
demand of both x and y rises by 1% with a 3% decrease in the price of either x or y
QUESTION 16
With elastic demand, a price increase will
1.
lower marginal revenue
2.
lower total revenue
3.
increase total revenue
4.
lower marginal and total revenue
QUESTION 17
A direct relation between the price of one product and the demand for another holds for all
1.
complements
2.
substitutes
3.
normal goods
4.
inferior goods
1.
relatively elastic
2.
relatively inelastic
3.
unitary elastic
4.
perfectly inelastic
Explanation / Answer
1.When proportionate change in price >proportionate change in quantity,then demand is relatively inelastic.
Answer-2.
2.Cross price elasticity is used to measure the responsiveness of change in demand of one product due to the change in price of the other product.
Answer-2
3.When the goods are substitutes,the cross price elasticity of demand is positive.
Exy=% change in demand of x/%change in price of y
When price of y falls by 1%,demand of x rises by 3%.
None of the options are correct.
4.When demand is elastic then the proportionate change in price is less than the proportionate change in quantity demanded.
Quantity demanded will fall more than change in price.Thus,TR will fall.
Answer-2.
5.When price of a substitute good rises,the demand of the other substitute rises.
Answer-1
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