B. In which price range of the accompanying demand schedule is demand inelastic:
ID: 1127839 • Letter: B
Question
B. In which price range of the accompanying demand schedule is demand inelastic: Quantity emanded ice $4 $3 $2 $1 4 (a) $4-$3 (b) $3-$2 (c) $2-$1 (d) Below $1 9. In which of the following instances will total revenue decline? (a) Price rises and price elasticity of demand has a value of one (b) Price falls and demand is elastic (c) Price rises and demand is inelastic (d) Price rises and demand is elastic 10. If the demand for farm products is price inelastic, a good harvest will cause farm revenues to: (a) increase. (b) decrease. (c) be unchanged. (d) either increase or decrease depending upon what happens to supply Other things being equal, the greater the proportion of a consumer's budget expenditures that a given good takes, the: 11. (a) more elastic the demand for the good. (b) less elastic the demand for the good. (c) the more unitary elastic the demand for the good. (d) the smaller the income elasticity for the good.Explanation / Answer
Ans :8 ) Demand is inelastic from $2-$1 as change in price is 100% while change in quantity is just 25%. So elasticity is 0.25 and hence inelastic.
Ans: 9) Total revenue will only decline when price rises and demand is very elastic. So a 100% rise in price will lead to a fall in demand by more than 100%.
Ans: 10) If demand for farm products is inelastic, a good harvest may lead to increase or decrease in farm revenues depending upon the supply. If supply is greater and price falls then since demand is inelastic, total revenues also fall. On the other hand, if supply is lesser, prices rises and because demand is inelastic, total revenues rise.
Ans: 11) The greater the proportion of consumer's budegt expenditures that a given good takes, more elastic is the demand for the good. For example, luxury goods like cars.
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