1.) The first set of six questions involves the concept of elasticity. The first
ID: 1200432 • Letter: 1
Question
1.) The first set of six questions involves the concept of elasticity. The first three of those six questions involve the product ELECTRICITY. The next three questions are similar to the first three, but involve the product RESTAURANT MEALS. The demand for ELECTRICITY is (this refers to the price-elasticity of demand for the product): A. Unit elastic B. Elastic C. Inelastic
2.) The coefficient of the price elasticity of demand for ELECTRICITY is: A. Less than or below one (<1) B. Equal to one (=1) C. Greater than or above one (>1)
3.) If you were a manager of a business selling ELECTRICITY, what would happen to your GROSS REVENUES if you LOWERED the price of this product per kilowatt-hour? A. Gross revenues would DECREASE if the price of electricity were lowered B. Gross revenues would REMAIN THE SAME if the price of electricity were lowered C. Gross revenues would INCREASE if the price of electricity were lowered
4.)The next three questions involve the product RESTAURANT MEALS. The demand for RESTAURANT MEALS is (this refers to the price-elasticity of demand for the product): A. Unit elastic B. Elastic C. Inelastic
5.) The coefficient of the price elasticity of demand for RESTAURANT MEALS is: A. Less than or below one (<1) B. Equal to one (=1) C. Greater than or above one (>1)
Explanation / Answer
1. ELECTRICITY IS A NECESSITY HENCE ITS DEMAND IS INELASTIC.
2. THE COEFFICIENT WILL BE LESS THAN OR BELOW ONE. <1
3.THE DEMAND WILL NOT CHANGE MUCH GROSS REVENUES WILL REMAIN THE SAME.
4.RESTAURANT MEALS ARE ELASTIC AND AN INCREASE IN THEIR PRICE WILL RESULT IN A GREATER DECREASE IN DEMAND FOR RESTAURANT MEALS.
5. COEFFICIENT FOR RESTAURANT MEALS WILL BE GREATER THAN OR ABOVE 1 >1
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