1. If O.P.E.C. increases its price of oil, and still the demand for oil decrease

Question

1. If O.P.E.C. increases its price of oil, and still the demand for oil decreases by a very small amount, we can conclude that the demand for oil is: a)Relatively elastic b)Relatively inelastic c)Perfectly elastic c) Perfectly inelastic ?????????????????????????????????????????????????????????????????????????? 2. The Cross-price-elasticity of demand for coffee and tea is likely to be 1) Greater than zero 2) Less than zero 3)Zero 4) Infinity ?????????????????????????????????????????????????????????????????????????? 3. If the income elasticity of a particular good is negative 0.2, it would be considered 1) a superior good 2) a normal good 3) an inferior good 4) an elastic good ?????????????????????????????????????????????????????????????????????????? 4. If the price of an ipad is increased and total revenue received from the sale of this ipad increases, then the price elasticity of demand for the ipad is: a) elastic. b) inelastic. c) unitary. d) None of the above.

Explanation / Answer

b)Relatively inelastic DEMAND IS SAID TO BE RELATIVELY INELASTIC WHEN THE PERCENTAGE CHANGE IN DEMAND IS LESS THAN THE PERCENTAGE CHANGE IN PRICE.2 1) Greater than zero BECAUSE THE CHANGE IN THE PRICE OF SUBSTITUTE GOODS DO EFFECT THE DEMAND FOR THE OTHER GOOD TO SOME EXTENT BUT NOT UPTO INFINITY.3) an inferior good BECAUSE WHEN WITH THE INCREASE IN THE INCOME OF A PERSON STOPS OR DEDUCES THE USE OF INFERIOR GOOD AND OPTS FOR THE GOOD QUALITY OPTION.4 b) inelastic. DEMAND IS RELATIVLY INELASTIC WHEN THERE IS A DIRECT RELATION SHIP BETWEEN PRICE AND REVENUE RECEIVED FROM SALES

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