Question

# Total revenue equals the price multiplied by the quantity. The relative change price and quantity is...

Total revenue equals the price multiplied by the quantity. The relative change price and quantity is given by the concept of ________________.

Select the correct answer below:

profit margin

relative value

elasticity

economies of production

When demand is elastic and price increases, what happens to both revenue and quantity?

Select all that apply:

• revenue decreases

• revenue increases

• quantity decreases

• quantity increases

What is the relationship between two goods that are complements?

Select the correct answer below:

The cross-price elasticity of demand is positive because the goods are interchangeable.

The cross-price elasticity of demand is negative because the goods are typically purchased together.

The cross-price elasticity of demand is positive for one good and negative for the other.

The cross-price elasticity of demand is zero.

1. Ans: Elasticity

Explanation:

Elasticity is the degree of responsiveness of quantity demanded of a good due to a change in the price of the good. This is called the relative change price and quantity.

2. Ans: revenue decreases & quantity decreases

Explanation:

We know price and quantity are inversely related. So, when price increases, quantity will decreases. Since demand is elastic, a percentage increases in price will lead to more than a percentage decreases in quantity. That's why revenue will decreases.

3. Ans: The cross-price elasticity of demand is negative because the goods are typically purchased together.

Explanation:

CPED negative means an increases in price of one good leads to a decrease in demand for another good. It happens in case of complementary goods.

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