Question

5a)The price of car batteries increases by 10 percent and the quantity demanded decreases by 10 percent. What is the price elasticity of car batteries?

Unit elastic, and revenue will not change

Elastic, and revenue will increase

Elastic, and revenue will decrease

Inelastic, and revenue will increase

b)Good A and Good B have negative income elasticities, but Good A is more negative than Good B. If the economy’s income increases, which of the following is true?

Good A’s demand will decrease less than Good B’s demand curve.

Good A’s demand will increase more than Good B’s demand curve.

Good A’s demand will increase less than Good B’s demand curve. Good A’s demand will increase less than Good B’s demand curve.

Good A’s demand will decrease more than Good B’s demand curve.

c)

Price elasticity of demand is zero. This means that, in a market equilibrium, quantity is determined by which of the following?

Only demand

Mainly demand, but partly by supply

Only supply

Both demand and supply

d)An advertising campaign for Rita’s Rhubarb Pies convinces consumers that the pies of competitors are poor substitutes. For Rita’s pies, we would expect price elasticity to _________ and cross elasticity with competitors to _________.

decrease; decrease

increase; increase

decrease; increase

increase; decrease

e)A change in technology in the widgets industry does not affect which of the following?

The position of the supply curve for widgets

The production of widget

The production possibilities curve

The position of the demand curve for widgets

Answer 1

a) "A"

the demand is unit elastic and the revenue will not change in the market.

b) "D"

Good A's demand will decease more than the demand for good B as good A is inferior compared to good B.

c) "A"

As the demand elasticity is Zero that means the price is decided by the demand for the good alone.

d) As the goods are considered as better and the preference for those good has increased the demand will be more inelastic and other will have more elastic demand. Answer is "C".

e) "D"

A change the technology will not affect the demand for the good.