Elasticity of demand
1) total revenue will increase if price:
a) falls and demand is elastic b) falls and demand is inelastic
c) rises and demand is elastic d) rises and demand is unitary elastic
2) Sony is considering a 10 percent price reduction on its colour telivision sets .If the demand for sets in this price range is inelastic:
a) revenue from color sets will remain constant
b) revenues derived from color sets will decrease
c) revenues derived from color sets will increase
d) the number of television sets sold will decrease
3) For which product is the income elasticity of demand most likely to be negative?
a) computer software b) used clothing
c) basketballs d) bread
4) when demand is price inelastic ,total revenue is :
a) directly related to quantity demanded
b) inversely related to quantity demanded
c) directly related to price
d) not related to either price or quantity demanded
5) Compared to the lower-right portion ,the upper -left porion of most of the demand curves tend to be :
a) more inelastic b) more elastic
c) unit-elastic d) perfectly inelastic
Answers
Answer:
1) The correct answer is b) falls and demand is inelastic
2) The correct option is b) revenues derived from color sets will decrease
3) The correct option is a) computer software
4) The correct option is a) directly related to quantity demanded
Explanation:
1) Demand is considered to be inelastic if a price rise results in an increase in overall income since the quantity required does not change much as a result of the price increase.
2) Because the price is low so the revenue will decrease.
3) Inferior goods have a negative income elasticity of demand, meaning that as customers' incomes increase, they purchase less inferior goods.
4) The percentage change in the amount sought is larger than the percentage change in price when demand is price elastic. Therefore, if price drops, quantity sold rises by a bigger proportion, increasing income.
SPJ2