Question

1. A manager at Kroger changed the price of a package of ground coffee from $10.99 to $9.99. He is trying to use ____ as a price cue with this price change.
MULTIPLE CHOICE:
A. $9 ending B. Promotion signs C. Price guarantee D. Left digit effect

2. Frontier sells 3 million copies of its nature magazine, Wilderness, at $3.00 per copy. If the price is increased to $3.25 a copy, only 2.55 million copies will be sold. This is ____ demand with price elasticity of ______.
MULTIPLE CHOICE:

A. Elastic; -2.3 B. Inelastic; 0.78 C. Elastic; -1.8 D. Elastic; 1.8 E. inelastic; -0.78

3. Price elasticity of demand is impacted by which factor(s):

MULTIPLE CHOICE:

A. the availability of substitutes

B. the cash outlay of the purchase is low relative to a person's income.
C. the availability of substitutes; and the cash outlay of the purchase is low relative to a person's income.
the “life span” or durability of the product
D. the availability of substitutes; the cash outlay of the purchase is low relative to a person's income; and the “life span” or durability of the product

Answer 1

Answer
1Left Digit Effect
The manager is using left didgit effecct to attract consumers to ints increased perception of value.

2 Elastic; -1.8
Percentage Change in price
= [(3-3.25)/3] x 100 = -8.33
Percentage Change in quantity demanded
= [(3,000,000 - 2,55,000)/3,000,000)] x 100 = 15
Price elasticity of demand = 15 / (-8.33) = -1.8
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3 availability of substitutes
When there are many substitutes available price tends to be more elastic than a good which has no subtitutes

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