Question

(67)Suppose that when the price of cherries is $10 per lb, the quantity supplied of cherries is 20 lbs. When price of cherries is $6 per lb, the quantity supplied of cherries is 12 lbs. The price elasticity of supply is:

(a)1.7

(b)1.0

(c)2.5

(d)0.8

(69)Suppose you are a member of a local soccer club. The goal of your soccer club is to increase the amount of revenue earned from ticket sales in the local competition. Two executives of the soccer club, Evadney and Felix suggest that the solution is to increase ticket prices. Are Evadney and Felix correct?

(a)They are correct if the demand for tickets is price elastic

(b)They are correct if the demand for tickets is unitary elastic

(c)They are correct if the demand for tickets is price inelastic

(d)They are incorrect if the demand for tickets is price inelastic`

(72)Which of the following statements is true?

Suppose CD players are classified as normal goods then it would be expected that:

(a)Consumers buy less when the price falls and vice versa

(b)Consumers buy less when income rises and vice versa

(c)Consumers buy more when income rises and vice versa

(d)More information needed to answer this question

Answer 1

Q67
ANswer
Elasticity of supply=(change in quantity/average quantity)/(change in price/average price)
change in quantity=20-12=8
average quantity=(20+12)/2=16
change in price=10-6=4
average price=(10+6)/2=8
Elasticity of supply=(8/16)/(4/8)
=1
option b
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Q69
ANswer
Option c
(c)They are correct if the demand for tickets is price inelastic
A revenue is maximum at unit elastic price. Price and the absolute value of elasticity are positively related to an increase in price increases elasticity and vice verse.
The price elasticity is inelastic, and the increase in price up to unit elastic increases the revenue.
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Q72
Answer
Option c
(c)Consumers buy more when income rises and vice versa
The income and demand for a normal good are positively related so an increase in income increases demand and vice verse.