Question

QUESTION 5

1. Which of the following best describes Cross Elasticity:

   	a.	As incomes rise, more people will purchase vacation packages.
   	b.	If the price of gasoline goes up, more people will car pool.
   	c.	If the price of coke goes up, more people will buy pepsi.
   	d.	If the price of your prescription goes up, you will continue to purchase because you need them.

QUESTION 6

1. Households representing middle income earners are growing faster than the low and high income earners

   True

   False

QUESTION 7

1. Sole Proprieters make up the majority of U.S. businesses.

   True

   False

QUESTION 8

1. Firms will maximize revenue at the point where demand for a product is Unit Elastic.

   True

   False

Answer 1

Question 5.

Cross-elasticity of demand is defined as responsiveness of change in demand for a good due to change in price of another good. It is generally used to measure substitutability of a good with another good.

The correct answer is ( c ). Both coke and pepsi are close substitutes of each other.

Question 6.

True.

It has been a general trend in most of the economies around the world that the middle income class is growing much faster than the other two categories.

Question 7.

True.

Sole proprietors made up for more than 70% of all businesses in the United States as of 2015.

QUESTION 8

False

It is not mandatory. The firm may maximize its revenue depending on elasticity of a product. If a product is inelastic, the firm may maximize revenue at a different point than when the demand for a product is elastic.