Question

Last year Emma bought 5 pairs of dress shoes a year. This year she received a...

Last year Emma bought 5 pairs of dress shoes a year. This year she received a 10% raise and bought 6 pairs of shoes. Emma considers shoes a(n):

Normal Good
Inferior Good
Elastic Good
Inelastic Good

Question 7

Apple just found out that, the iphone 6 in Mexico has an elastic demand. If they want to increase revenue, what do you think they should do?

Decrease the price of iphone 6
Increase the price of iphone 6
Leave the price unchanged

Question 8

Assume the demand elasticity of chocolate is constant and equal -1.0. What will happen to the chocolate sales revenue of Nestle, if the price of chocolate increases?

It will increase
It will decrease
The change in revenue will be uncertain
Revenue will not change
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Homework Answers

Answer #1

Answer
Option 1
Normal Good
Income and demand are positively related to normal good.
An increase in income increases the demand for a normal good, and a decrease in income decreases demand for an inferior good.
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Q7
Option 1
Decrease the price
A revenue is maximum when demand is unit elastic, and the price and elasticity are positively related to the decrease in price up to unit elastic demand will increase revenue.
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Q8 Answer
Option 2
A -1 elasticity means the demand is unit elastic and an increase in price will make demand elastic. It will decrease revenue.

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