Multiple choice questions.

You are watching: Given the following income elasticities of demand:

1.The price elasticity of need is: a) the proportion of the percentage readjust in quantity demanded come the percentage adjust in price. b) the responsiveness the revenue come a adjust in quantity. C) the ratio of the change in amount demanded divided by the change in price. D) the solution of revenue come a adjust in price.

2.If demand is price elastic, then: a) a climb in price will certainly raise total revenue. B) a autumn in price will certainly raise full revenue. c) a autumn in price will reduced the amount demanded. D) a increase in price won"t have any type of effect on complete revenues.

3. Complementary products have: a) the very same elasticities that demand. B) very low price elasticities that demand. C) an adverse cross price elasticities of demand with respect to every other. d) positive revenue elasticities of demand.

4. The price elasticity of need generally tends to be: a) smaller in the lengthy run 보다 in the short run. B) smaller in the brief run than in the long run. c) bigger in the short run than in the long run. D) unrelated come the size of time.

5. If the price elasticity of supply of doodads is 0.60 and the price boosts by 3 percent, then the quantity provided of doodads will increase by a) 0.60 percent. B) 0.20 percent c) 1.8 percent d) 18 percent.

6. Suppose we know that the price elasticity of need of good X is equal to -1.2. Then, if the price will boost by 5%, we can predict v certainty that a) quantity demanded the that great will increase. B) the revenue of the firm creating that an excellent will increase by 6%. C) the revenue of the firm developing that an excellent will to decrease by 6%. D) the amount demanded that that an excellent will decrease by 6%. e) nobody of the above.

7. A 10% increase in the price that movie ticket in Westridge 8 leader to a 15% decrease in the number of tickets sold, indicating the need for movie ticket in Westridge 8 is: a) elastic. b) inelastic. C) unit elastic. D) can not tell from the information given.

8. If the cross-price elasticity in between two commodities is 1.5, a) the two goods are luxury goods. B) the two items are complements. C) the two products are substitutes. d) the two goods are common goods.

True/False/Uncertain. because that each of the adhering to statements, say even if it is it is true, false, or uncertain and explain her answer.

1. That is reasonable to intend the overcome price elasticity of need for golf clubs and also golf balls to it is in positive.

Golf clubs and also golf balls room complementary goods. This method that, together the price the golf clubs boosts (a confident change), the usage of golf balls reduce (a an unfavorable change). Overcome price elasticity of demand is equal to the proportion of these changes and also will be negative. The statement is false.

2. If the need is perfectly elastic, then a change in the supply curve does not influence the equilibrium price.

 True, because a perfect elastic demand curve is horizontal. Therefore, no matter what the change is the equilibrium price will constantly remain the same. (See graph.) 3. The demand curve because that autos is much more elastic 보다 the demand curve for Fords.

False. A Ford can be substituted by a various model. The is no as simple to discover a substitute because that a automobile in general. The an ext substitutes a good has, the more elastic is the need for the good. Therefore, need for Fords is an ext elastic. 4. Suppose you own a "Here comes the Sun" tan salon and also the demand curve because that your services is bottom sloping. Further, intend that a new tanning salon dubbed "Sunny Delight" opens up two blocks away from your salon. Tell even if it is the following three statements are true, false or uncertain and also explain your answer.

a. The demand curve because that your solutions shifts to the right. This brand-new salon is a substitute for your services. ~ it has actually appeared, your consumer have much more choice, and some of castle will begin using the brand-new salon. So the demand for your solutions will decrease, or change to the left. The statement is false.

b. The demand for your solutions becomes an ext elastic. One of the factors determining the price elasticity of demand for the great is the variety of substitutes. Much more substitutes - much more elastic demand. The explain is true.

c. The cross-price elasticity the the need for your solutions with respect come the price charged by "Sunny Delight" is negative. These two products (services) are substitutes. The cross-price elasticity that substitutes is positive, due to the fact that as the price of among them increases, the need for (and therefore the usage of) the various other one increases, too. The explain is false.

Short price Question. 5. Originally Hans Johnson to be the only customer in the sector for "Casa de Econ" beer, developed by a little local brewery. When the price the "Casa de Econ" six-pack varies in between \$10 and also \$20, the price elasticity the his individual demand is same to an adverse 1. Now imagine the Hans has actually been cloned 4 times, and now we have actually 5 identical consumers in the sector for "Casa de Econ". What will occur to the price elasticity the market demand in the price selection given above? will certainly the need become an ext price elastic, less price elastic, or will elasticity remain the same? define your answer.

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Since elasticity faces relative changes, it doesn"t issue how numerous consumers we have in the sector as lengthy as every one of them are same. (If the amount demanded because that each the them changes by 50%, the would median the amount demanded in the entire market will change by 50%, too.) therefore the price elasticity of demand will continue to be the same.