Question

-The demand for low-priced goods is relatively _________, and the demand for high priced goods is relatively __________.

-The more time you have to adjust to a price change, the _________ (more/less) elastic is your response, because time allows consumers to seek out available substitutes.

-For elastic, an increase in price leads to ________ in total revenue, and decrease in price leads to _______ in total revenue.

-For inelastic, increase in price leads to _______ in total revenue, and decrease in price leads to _____ in total revenue.

-For unitary elastic, increase in price leads to _______ in total revenue, and decrease in price leads to _____ in total revenue.

-Consider the market for bicycles. If a dealer cuts price by 20 percent and sells 10 percent more bikes, then demand for bicycles is:

A. Inelastic, and total revenue will increase.

B. Elastic, and total revenue will increase.

C. Inelastic, and total revenue will decrease.

D. Elastic, and total revenue will decrease.

- If popcorn sales declined 20% when the candy price dropped 10%, the cross-price elasticity of demand for popcorn = __________, a relatively elastic response.

If popcorn sales declined 20% when the movie admission price increased 10%, the cross-price elasticity of popcorn is _____, a relatively elastic response.

- When goods are substitutes, cross-price elasticity is _______. When goods are complements, cross-price elasticity is ______.

- Your income rises by 10%. You go to the movies more and buy 20% more popcorn. Income elasticity of demand for popcorn is ______.

-When a good is a normal good, income elasticity is ________. When a good is an inferior good, income elasticity is _______.

-Income elasticity of demand = 3.29 =>popcorn is an (a) ____ good b/c the income elasticity of demand is __________.

Answer 1

The demand for low-priced goods is relatively inelastic , and the demand for high priced goods is relatively elastic

- There will not be significant change in demand of customer is price of low priced goods changes,but people will change demand if price changes of high priced goods

The more time you have to adjust to a price change, the more elastic is your response, because time allows consumers to seek out available substitutes

- More time gives us more option to change and alter existing demand, thus it will become more elastic

For elastic, an increase in price leads to decrease in total revenue, and decrease in price leads to increase in total revenue.

- In elastic demand, minor change in price will reflect magnified impact on quantity.

For inelastic, increase in price leads to increase in total revenue, and decrease in price leads to decrease in total revenue

- In elastic demand, magnified change in price will reflect minor impact on quantity.

For unitary elastic, increase in price leads to no change in total revenue, and decrease in price leads to no change in total revenue

- In unit elastic demand, change in demand and price remains the same each other compensate by increase or decrease

Consider the market for bicycles. If a dealer cuts price by 20 percent and sells 10 percent more bikes, then demand for bicycles is Inelastic, and total revenue will decrease.

- Inelastic demand cause loss in total revenue if price reduced

If popcorn sales declined 20% when the candy price dropped 10%, the cross-price elasticity of demand for popcorn = 2 , a relatively elastic response.

Cross price elasticity = % change in quantity of x product / % change in quantity of y produce

If popcorn sales declined 20% when the movie admission price increased 10%, the cross-price elasticity of popcorn is = -2, a relatively elastic response.

Cross price elasticity = % change in quantity of x product / % change in quantity of y produce

When goods are substitutes, cross-price elasticity is positive. When goods are complements, cross-price elasticity is negative.

Substitute have direct relation and complementary goods have negative relation

Your income rises by 10%. You go to the movies more and buy 20% more popcorn. Income elasticity of demand for popcorn is 2.

Income elasticity = % change in quantity of x product / % change in income

When a good is a normal good, income elasticity is positive. When a good is an inferior good, income elasticity is negative.

- With increase in income customer will by more normal goods and reduce buying inferior goods,

Income elasticity of demand = 3.29 =>popcorn is a luxury good b/c the income elasticity of demand is positive and more than 1.