Three parts to the question: 1a. After running a promotional campaign, the owner

Question

Three parts to the question:

1a. After running a promotional campaign, the owners of a local shoe store decided to decrease the prices for the shoes sold in their store. One can imply that

a. The promotional expenditures made the demand for their shoes more elastic

b. The promotional expenditures made the demand for their shoes more inelastic

c. The promotional expenditures has no effect on the shoe demand elasticity

d. The owners got it wrong. To cover the promotional expenses, they should have raised the prices

1b. After firm A producing one good acquired another firm B producing another good, it reduce the prices for the bundle of goods. One can conclude that the goods were

a. Substitutes

b. Complements

c. Not related

d. None of the above

1c. After massive promotion of Justin Bieber’s latest music album, the producers reacted by raising prices for his albums. This implies that promotion expenditures made the album demand

a. More Elastic

b. Unitary elastic

c. The Change is due to psychological pricing

d. Less elastic

Explanation / Answer

1a.

the promotional expenditures made the demand for their shoes more elastic

the above is the answer

because more elastic means higher % change in quantity demanded for % change in price

1b.

b. Complements

the above is the answer

1c.

less elastic

the above is the answer

because there would be less change in quantity demanded even after price rises.

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