Question

1. A product’s price has increased by 25% but demand has not been affected. It can be concluded that this product has:

   		Slightly inelastic demand
   		Elastic demand
   		Unitary elasticity
   		Inelastic demand

5 points   

QUESTION 2

1. Premium pricing strategies are best for products with a ______ price and ______ quality:

   		lower; higher
   		higher; lower
   		lower; lower
   		higher; higher

Answer 1

1. Option D.

• Inelastic demand for a product shows that any change in the price of a good will not affect its quantity demanded.
• Hence a scenario in which there is no change in the demand even when the price changes by 25% shows that this product has an inelastic demand.

2. Option D.

• Premium pricing is a marketing strategy in which firms might overprice their products when compared to its competitors to show that their product has the best quality.
• Hence premium pricing strategies are best for products with a higher price and a higher quality.