9. Are the following statements true or false? Explain your answers, a. A 10 per
ID: 1094306 • Letter: 9
Question
9. Are the following statements true or false? Explain your answers, a. A 10 percent reduction in price that leads to a 5 percent increase in the amountpurchased indicates aprice elasticity of more than 1. b. A 10 percent reduction in price that leads to a 2 percent increase in total expenditures (or total revenue) indicates a price elasticity of more than 1. c. If the percentage change in price is less than the result- ant percentage change in quantity demanded, demand is inelastic. 12. s Sausage Dog Stand projects the following demand for Jill's sausage dogs: QUANTITY PURCHASED (per day) PRICE (S) 400 a. Calculate the price elasticity of demand between $2 and $4. Is demand in this range elastic or inelastic? b. Calculate the price elasticity of demand between $4 and $6. Is demand in this range elastic or inelastic? 13. Suppose John, the owner-manager of a local hotel pro- jects the following demand for his rooms: QUANTITY PURCHASED (per Night) PRICE (S 1000 110 900 130 70 a. Calculate the price elasticity of demand between $90 and $110. b. Is the price elasticity of demand between $90 and si10 elastic, unit elastic, or inelastic? c. Will John's total revenue rise if he increases the price from $90 to $110? d. Calculate the price elasticity of demand between S110and $130. e. Is the price elasticity of demand between S110 and $130 elastic, unit elastic, or inelastic? f. Will John's total revenue rise if he increases the price from $110 to $130? "Asterisk denotes questions for which answers are given in Appendix B.Explanation / Answer
9a) False. Percentage change in quantity is less than percentage change in price.
9b) True.
9c) False. Its elastic.
12a) ?Q/?P *(p/q) = 0.2
Therefore demend is inelastic.
12b)?Q/?P *p/q =1
This is unit elastic.
13a)The elasticity is 0.45 by above formulae.
13b) Inelastic as it is less than one.
13c)Yes it will rise from 9000 to 9900.
13d) It is 1.23.
13e) Elastic as it is greater than 1.
13f) No it will fall from 9900 to 9100.
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