Question

QUESTION 1

If price is cut and demand is inelastic, then

1. total revenue will rise.

2. quantity demanded will fall

3. total revenue will fall.

4. total revenue will not change.  

QUESTION 2

The presence of substitute goods will tend to make demand more

1. inelastic.

2. vertical.

3. elastic.

4. unit elastic.

  

QUESTION 3

Brand name products tend to have demand curves that are relatively more inelastic because

1. brand name products tend to have more substitutes.

2. brand names are not valued.

3. brand name products tend to have fewer substitutes.

4. consumers are very sensitive to the prices of brand names.

QUESTION 4

A manager can determine if her product is viewed as a normal good or an inferior good by considering

1. income elasticity.

2. cross elasticity.

3. price elasticity.

4. advertising elasticity.

QUESTION 5

A luxury good has

1. a very high income elasticity.

2. a cross elasticity of one.

3. a negative price elasticity.

4. a negative income elasticity.

QUESTION 6

Knowing demand is equivalent to knowing the

1. average investor.

2. customer.

3. employee.

4. economic profit.

Answer 1

Answer 1. Option 3 is correct. Total revenue will fall because in case of inelastic demand the rise or fall in proce is much greater than the fall or or rise in demand respectively. So if proce was $10 and decreased to 5 and demand was 10 units and increased to 12 thus the total revenue drecreased from 100 to 60.

Answer 2. Option 3 is correct. Due to availabilities of substitute the demand is elastic as even a small change in price of one good will lead to the customers changing to their preference to the other substitute available.

Answer 3. Option 3 is correct as beanded products have less susbstitutes making their demand inelastic. Thus the percentage change change in price will always be greater than the percentage change in demand.

Answer 4. Option 1 is correct. As a rise in incom will lead to more purchase of normal goods and no purchase of inferior and a drop in income will lead to purchase of inferior goods.