Question

QUESTION 36 The price elasticity of demand for Alpha personal computer is estimated to be -2.0. If the price of the computers decreases by 5%, what would be the expected percentage changes in the quantity demanded and in the total revenue for the company? a) Quantity demanded would decrease by 10% and total revenue would decreases by 5%. b) Quantity demanded would increase by 10% and total revenue would increases by 5%. c) Quantity demanded would decrease by 10% and total revenue would decreases by 10%. d) Quantity demanded would increase by 10% and total revenue would increases by 10%.

QUESTION 37 If the income elasticity of demand for good X is -0.5, and the people’s disposable income decreases by 10%, then a) X is a normal good and the demand for X will increase by 5%. b) X is a normal good and the demand for X will decrease by 5%. c) X is an inferior good and the demand for X will increase by 5%. d) X is an inferior good and the demand for X will decrease by 5%.

QUESTION 38 If two goods have a cross price elasticity of demand of -1.2, and the price of one good decreases by 10%, then: a) the two goods are substitutes and the demand for the other good will increase by 12%. b) the two goods are substitutes and the demand for the other good will decrease by 12%. c) the two goods are complements and the demand for other good will increase by 12%. d) the two goods are complements and the demand for other good will decrease by 12%.

QUESTION 39 Brand X computer manufacturer is selling 2000 computer printers per month, and Brand Y computer has just increased the price of its computer from $300 to $500. If the arc cross price elasticity of demand for X’s printer relative to computer Y’s prices is -1.0, what will be X’s new quantity sold? a) 500 printers b) 1200 printers c) 2000 printers d) 3000 printers

Answer 1

The increase in the price of one good by 10% decreases the quantity demanded of the other good by 12%. Then goods are substitutes.

Therefore, the correct option is: (d)

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39.

The cross-price elasticity is -1. A 1% increase in the price of one computer will lead to a 1% decrease in quantity demanded of others. The percentage change in the price of Y is

Then the correct option is: (b)