Regarding demand and supply, which of the following statements is NOT correct? 1

Question

Regarding demand and supply, which of the following statements is NOT correct?

1)

Demand and supply simultaneously determine equilibrium market price

2)

b. Demand expresses intentions, but supply does not

3)

c. Demand is a potential concept distinguished from the transactional even of "units sold"

4)

d. Supply is more like scenario planning for operations than for actual production e. all of the above statements are correct

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

1)

2)

3)

4)

5)

leather jackets are luxury items

If demand were inelastic, then we should immediately:

Question 5 options:

1)

2)

3)

4)

5)

1)

Demand and supply simultaneously determine equilibrium market price

2)

b. Demand expresses intentions, but supply does not

3)

c. Demand is a potential concept distinguished from the transactional even of "units sold"

4)

d. Supply is more like scenario planning for operations than for actual production e. all of the above statements are correct

Explanation / Answer

for below question :

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

The correct option is option A

For other options, you can't say no one wants to buy leather jacket or, leather jacket is a luxury good, because demand isn't elastic. Mod value of elasticity is less than 1 (i.e. |e|=0.7 < 1). Therefore, demand for leather jacket is inelastic. A decrease in price will decrease the total revenue of that product when demand is inelastic.

And for option A,

We know elasticity= (? change in quantity demanded/?change in price)

If ?change in quantity sold= - 0.7?(as quantity sold or quantity demanded decrease, Therefore we use the minus sign) and percentage change in price= 1?, then

elasticity= -0.7/1= - 0.7

Answer- option A

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