Question

1. Firms should lower the prices on their goods​

   	a.	​If the demand for the product is elastic
   	b.	​If it acquires a firm selling a complement good
   	c.	​If it acquires a firm selling a substitute good
   	d.	​Both a and b

Answer 1

Since the law of supply stats that there is a direct relationship between price and quantity supplied and other factors which affect the supply remains same.

The supply curve shows the direct relationship between price and quantity supplied. The determinants are;

Technology, costs of inputs and number of potential suppliers.

Since the elasticity of supply can be defined as the measurement of the degree of the responsiveness of the quantity supply due to the change in the price level.

When demand for product is elastic, then with the decrease in the price slightly, the quantity demand will increase more. Hence firm revenue will increase.

Hence it can be said that firms should lower the prices on their goods​ if the demand for the product is elastic.

Hence option a is the correct answer.