Question

6) The price elasticity of demand for new cars is 1.2. If automobile manufacturers raise their price, then __________.

A) total revenue will fall.
B) total revenue will remain unchanged.
C) total revenue will increase.
D) total revenue will fall initially but eventually rise.

7) Read the article entitled “Alcohol Policy and Sexually Transmitted Diseases”. You can find the article on Moodle or Canvas. The article was a direct application of the following elasticity concept:

A) Price Elasticity of Demand

B) Price Elasticity of Supply

C) IncomeElasticity
D) Cross Price Elasticity

8. If the cross-price elasticity of demand between Guinness Beer and Bass Beer is -0.31, then Guinness and Bass are _____________.
A) complements.
B) price inelastic goods.

C) substitutes.
D) necessities.
E) Normal Goods.

9) If the quantity demanded of hamburgers increases by 20 percent when the price decreases by 5 percent, then the price elasticity of demand in absolute value is
A) 0.25.
B) 4.0.

C) 20.0.

D) 5.0.

Answer 1

(6) there is negative relationship between the price change and total revenue change in case of elastic demand.

The price elasticity of demand for car is 1.2 (elastic). Hence, an increase in price of car will decrease the total revenue.

Answer: Option (A)

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(7) Imposition of tax on alcohol purchases, leads to increase in price of alcohol. It leads to decrease in demand for alcohol by the youngster. Hence, in the Article " Alcohol Policy and Sexually Transmitted Diseases", there was a direct application of price elasticity of demand.

Answer: Option (A)

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(8) If cross price elasticity is negative, then goods are complementary.

If cross price elasticity is positive, then goods are substitute.

If the cross-price elasticity of demand between Guinness Beer and Bass Beer is -0.31, then Guinness and Bass are Complements

Answer: Option (A)

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(9) Price elasticity of demand , ed = (% change in quantity demanded / % change in price)

=> ed = ( 20 / -5)

=> ed = -4

=> IedI = 4 (Absolute value)

Answer: Option (B)