Question

3a)At the farmer's market, Jan sells bags of apples. When she decreases the price, she attracts more customers. What can we conclude?

Demand is elastic and Jan's revenue will increase.

We have insufficient information to make any statements about elasticity.

Demand is inelastic

Demand is elastic

b).

If the cross-elasticity of demand for Good Q with respect to Good Z is -1.9, then the goods are

complements

normal goods

substitutes

inferior goods

c).Assume that the demand for unskilled workers is inelastic. What will the imposition of an effective minimum wage do?

Decrease total income of minimum wage earners and, as time passes, decrease unemployment

Increase total income of minimum wage earners and, as time passes, increase unemployment

. Decrease total income of minimum wage earners and, as time passes, increase unemployment

Increase total income of minimum wage earners and, as time passes, decrease unemployment

d)f the supply of widgets is price-elastic, then a 10 percent increase in the price of widgets will cause which of the following?

Shift the supply curve to the right by less than 10 percent

Increase the quantity supplied by less than 10 percent

Shift the supply curve to the right by more than 10 percent

Increase the quantity supplied by more than 10 percent

e)A good has a price elasticity of demand of 2.0. You would correctly interpret this to mean which of the following?

10 percent increase in price would lead to a 20 percent increase in quantity demanded.

A 10 percent increase in price would lead to a 5 percent decrease in quantity demanded.

A 10 percent increase in price would lead to a 5 percent increase in quantity demanded.

A 10 percent increase in price would lead to a 20 percent decrease in quantity demanded.

Answer 1

a) "D"

As a decrease in the price attracts more and more customer in the market the demand for the goods is elastic.

b) "A"

As the cross price elasticity is in the negative the two goods can be complement. It would have been positive if they were substitute.

c) "B"

As the demand is inelastic, it will increase the income of the wage earners and in the long run that will increase the unemployment.

d) "D"

As the supply is price elastic an increase in the price will lead to a higher increase in the supply of goods.

e) "A"

A 10% increase in the price will increase the demand by 20%, as the elasticity is not negative an increase in the price will not decrease the demand.