Question 1

When demand elasticity is ____ in absolute value (or ____),an increase in price will result in a(n)____ in total revenues.

Accepted Answer

When demand elasticity is less than 1 in absolute value, it is considered inelastic. In this case, an increase in price will lead to an increase in total revenues because the percentage decrease in quantity demanded is less than the percentage increase in price.

Question 2

Marginal revenue (MR)is ____ when total revenue is maximized.

Accepted Answer

When total revenue is maximized, marginal revenue is equal to zero. This is because any further increase in quantity sold would lead to a decrease in price, causing the total revenue to decrease. Therefore, the optimal quantity is where MR=0.

Question 3

Identify the reasons why the quantity demanded of a product increases as the price of that product decreases.

Accepted Answer

A) As the price of a product decreases, consumers feel as though they have more purchasing power, effectively increasing their real income, which can lead to an increase in the quantity demanded. B) When the price of product A decreases, it becomes relatively cheaper compared to product B (assuming product B is a substitute), making product A more attractive to consumers, which can also increase the quantity demanded of product A. C) is incorrect because it assumes a constant increase in demand with each price reduction, which doesn't account for individual preferences, income effects, or diminishing marginal utility.

Question 4

If the cross price elasticity measured between items A and B is positive,the two products are referred to as:

Accepted Answer

If the cross price elasticity measured between items A and B is positive, it means that an increase in the price of item A will lead to an increase in the demand for item B. This indicates that item A and B are substitutes, meaning that they can be used in place of each other. The fact that they are inelastic as compared to each other is not necessarily true and is not a characteristic of substitutes. Complements are characterized by negative cross price elasticity, meaning that an increase in the price of item A will lead to a decrease in the demand for item B.

Question 5

Those goods having a calculated income elasticity that is negative are called:

Accepted Answer

Goods with a negative income elasticity are known as inferior goods. As income rises, demand for these goods decreases.

Question 6

Which of the following best represents management's objective(s)in utilizing demand analysis?

Accepted Answer

Utilizing demand analysis provides insights necessary for the effective manipulation of demand, as well as aids in the forecasting of sales and revenues. It does not specifically measure the efficiency of the use of company resources, so option B is incorrect. Therefore, the best choice is E, which includes options A and C.

Question 7

The factor(s)which cause(s)a movement along the demand curve include(s):

Accepted Answer

A movement along the demand curve is a change in the quantity demanded of a good in response to a change in its own price. Therefore, only choice D - a decrease in price of the good demanded, causes a movement along the demand curve. Choices A, B, and C may shift the demand curve itself, but they do not themselves cause a movement along the curve.

Question 8

An income elasticity (E_y)of 2.0 indicates that for a ____ increase in income,____ will increase by ____.

Accepted Answer

Income elasticity of demand measures the responsiveness of the quantity demanded for a good to a change in income, with all other factors being constant. An elasticity of 2.0 means that for a one percent increase in income, the quantity demanded will increase by two percent.

Question 9

Empirical estimates of the price elasticity of demand [in Table 3.4] suggest that the demand for household consumption of alcoholic beverages is:

Accepted Answer

Price inelastic demand means that the quantity demanded of a good or service changes less than proportionally in response to a change in price. For household consumption of alcoholic beverages, empirical estimates typically show that changes in price have a relatively small effect on the quantity demanded, indicating that it is price inelastic. This is because alcoholic beverages are often considered necessary or habitual purchases for consumers, making their demand less sensitive to price changes.

Question 10

Goods having a negative calculated income elasticity are...

Accepted Answer

Goods with a negative income elasticity are called inferior goods. This means that as income increases, the demand for these goods decreases. Examples of inferior goods include generic brands of food or clothing, as opposed to more expensive, brand-name options.

Question 11

Demand is given by Q_D = 620 - 10·P and supply is given by Q_S = 100 + 3·P.What is the price and quantity when the market is in equilibrium?

Accepted Answer

The answer of Demand is given by Q_D = 620...

Question 12

A price elasticity (E_D)of −1.50 indicates that for a ____ increase in price,quantity demanded will ____ by ____.

Accepted Answer

A price elasticity of -1.50 indicates that a 1% increase in price will lead to a 1.50% decrease in quantity demanded. Therefore, option C is the best choice. Options A, B, D, and E all provide incorrect information.

Question 13

Durable goods are:

Accepted Answer

Durable goods are those that have a long lifespan and are not meant for immediate consumption. They can be stored and repaired, which means they do not need to be replaced after each use. Examples include appliances, furniture, and vehicles.

Question 14

When demand is ____ a percentage change in ____ is exactly offset by the same percentage change in ____ demanded,the net result being a constant total consumer expenditure.

Accepted Answer

In unit elastic demand, a percentage change in price is exactly offset by the same percentage change in quantity demanded, resulting in a constant total consumer expenditure. Therefore, option B is the correct answer. Option A is incorrect because elastic demand would mean that a percentage change in price results in a greater percentage change in quantity demanded, resulting in a decrease in total consumer expenditure. Option C and D are incorrect because inelastic demand would mean that a percentage change in quantity or price does not significantly affect the total consumer expenditure.

Question 15

A linear demand for lake front cabins on a nearby lake is estimated to be: Q_D = 900,000 - 2P.What is the point price elasticity for lake front cabins at a price of P = $300,000? [HINT: E_p = (∂Q/∂P)(P/Q)]

Accepted Answer

The answer of A linear demand for lake front cabins...

Question 16

An increase in the quantity demanded could be caused by:

Accepted Answer

All the options listed can lead to an increase in the quantity demanded. An increase in the price of substitute goods can make the original good more attractive, leading to higher demand. A decrease in the price of complementary goods can increase demand for the original good as the two are often used together. An increase in consumer income levels generally increases the purchasing power, allowing consumers to buy more, thus increasing demand.

Question 17

An increase in each of the following factors would normally provide a subsequent increase in quantity demanded,except:

Accepted Answer

An increase in the level of competitor advertising would likely decrease the quantity demanded for the original product, as it could shift consumer preference towards the competitor's product.

Question 18

Suppose we estimate that the demand elasticity for fine leather jackets is -.7 at their current prices.Then we know that:

Accepted Answer

A negative elasticity means that the quantity demanded decreases as price increases. The magnitude of the elasticity (-.7) tells us that a 1% increase in price will result in a .7% decrease in quantity demanded. This is consistent with answer choice A.

Question 19

Which of the following would tend to make demand INELASTIC?

Accepted Answer

When the proportion of the budget spent on an item is very small, consumers are less sensitive to price changes, making demand inelastic.

Question 20

If demand were inelastic,then we should immediately:

Accepted Answer

When demand is inelastic, it means that the quantity demanded does not change significantly with a change in price. Therefore, raising the price can lead to higher revenue because consumers are relatively unresponsive to price increases.

Quiz 3: Demand Analysis

When demand elasticity is in absolute value (or ) ,an increase in price will result in a(n) in total revenues.

Marginal revenue (MR) is ____ when total revenue is maximized.

Identify the reasons why the quantity demanded of a product increases as the price of that product decreases.

If the cross price elasticity measured between items A and B is positive,the two products are referred to as:

Those goods having a calculated income elasticity that is negative are called:

Which of the following best represents management's objective(s) in utilizing demand analysis?

The factor(s) which cause(s) a movement along the demand curve include(s) :

An income elasticity (E_y) of 2.0 indicates that for a increase in income, will increase by .

Empirical estimates of the price elasticity of demand [in Table 3.4] suggest that the demand for household consumption of alcoholic beverages is:

Goods having a negative calculated income elasticity are...

Demand is given by Q_D = 620 - 10·P and supply is given by Q_S = 100 + 3·P.What is the price and quantity when the market is in equilibrium?

A price elasticity (E_D) of −1.50 indicates that for a increase in price,quantity demanded will by .

Durable goods are:

When demand is a percentage change in is exactly offset by the same percentage change in demanded,the net result being a constant total consumer expenditure.

A linear demand for lake front cabins on a nearby lake is estimated to be: Q_D = 900,000 - 2P.What is the point price elasticity for lake front cabins at a price of P = $300,000? [HINT: E_p = (∂Q/∂P) (P/Q) ]

An increase in the quantity demanded could be caused by:

An increase in each of the following factors would normally provide a subsequent increase in quantity demanded,except:

Suppose we estimate that the demand elasticity for fine leather jackets is -.7 at their current prices.Then we know that:

Which of the following would tend to make demand INELASTIC?

If demand were inelastic,then we should immediately:

Quiz 3: Demand Analysis

When demand elasticity is ____ in absolute value (or ____) ,an increase in price will result in a(n) ____ in total revenues.

Marginal revenue (MR) is ____ when total revenue is maximized.

Identify the reasons why the quantity demanded of a product increases as the price of that product decreases.

If the cross price elasticity measured between items A and B is positive,the two products are referred to as:

Those goods having a calculated income elasticity that is negative are called:

Which of the following best represents management's objective(s) in utilizing demand analysis?

The factor(s) which cause(s) a movement along the demand curve include(s) :

An income elasticity (Ey) of 2.0 indicates that for a ____ increase in income,____ will increase by ____.

Empirical estimates of the price elasticity of demand [in Table 3.4] suggest that the demand for household consumption of alcoholic beverages is:

Goods having a negative calculated income elasticity are...

Demand is given by QD = 620 - 10·P and supply is given by QS = 100 + 3·P.What is the price and quantity when the market is in equilibrium?

A price elasticity (ED) of −1.50 indicates that for a ____ increase in price,quantity demanded will ____ by ____.

Durable goods are:

When demand is ____ a percentage change in ____ is exactly offset by the same percentage change in ____ demanded,the net result being a constant total consumer expenditure.

A linear demand for lake front cabins on a nearby lake is estimated to be: QD = 900,000 - 2P.What is the point price elasticity for lake front cabins at a price of P = $300,000? [HINT: Ep = (∂Q/∂P) (P/Q) ]

An increase in the quantity demanded could be caused by:

An increase in each of the following factors would normally provide a subsequent increase in quantity demanded,except:

Suppose we estimate that the demand elasticity for fine leather jackets is -.7 at their current prices.Then we know that:

Which of the following would tend to make demand INELASTIC?

If demand were inelastic,then we should immediately:

When demand elasticity is in absolute value (or ) ,an increase in price will result in a(n) in total revenues.

An income elasticity (E_y) of 2.0 indicates that for a increase in income, will increase by .

Demand is given by Q_D = 620 - 10·P and supply is given by Q_S = 100 + 3·P.What is the price and quantity when the market is in equilibrium?

A price elasticity (E_D) of −1.50 indicates that for a increase in price,quantity demanded will by .

When demand is a percentage change in is exactly offset by the same percentage change in demanded,the net result being a constant total consumer expenditure.

A linear demand for lake front cabins on a nearby lake is estimated to be: Q_D = 900,000 - 2P.What is the point price elasticity for lake front cabins at a price of P = $300,000? [HINT: E_p = (∂Q/∂P) (P/Q) ]