Question

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 2 answers.)

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.

Answer 1

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.