e. 0-29 QUESTION 5 2 points \"No matter the price, I will always buy five gallon
ID: 1220470 • Letter: E
Question
e. 0-29 QUESTION 5 2 points "No matter the price, I will always buy five gallons of ice cream a week. I love ice cream!" This statement reflects a price elasticity of demand that is: O a" unitary. O b. perfectly inelastic. O c. elastic. O d, perfectly elastic. O e, inelastic. QUESTION 6 Used car dealers find that their sales rise in i recession. We can be certain that consumers view used cars as: 0 a. inferior O b. necessities. O c. substitutes. O d. luxuries. O e, normal goods. QUESTION 7 2 points Save Answer Winged Wonders is a specialty store that sells butterfly Winged Wonders is a specialty store that sels butterfly ornaments. The owner wants to increase her total revenue and knows that the price elasticity of demand for her product is -0.4. What should she do to her price? 0 a. Lower it by a relatively large amount b, Decrease it to zero. O c. Leave it unchanged and use another way to increase sales d. Lower it by a relatively small amount. e, Raise it by any amount.Explanation / Answer
5.
Correct Answer:
B. Perfectly Inelastic
Explanation:
Here, demand is not changing with change in prices of ice cream. Thus, it is a perfectly inelastic demand.
6.
Correct Answer:
Explanation:
It is the inferior goods whose demand increase with decrease in income. Here, decrease in income takes place during recession.
7.
Correct Answer:
E. raise it by an amount
Explanation:
Elasticity of demand is -.4. It means that there is decrease of 4% demand due to increase in 10% of the price. Thus, demand is inelastic in nature. In such a situation, raising a price will cause relatively small decrease in demand.
11.
Correct Answer:
A -10%
Explanation:
Cross elasticity = -1.5 = % change in demand of B / % change in price of A
-1.5 = 15% / % change in price of A
% change in price of A = 15% / (-1.5)
% change in price of A = -10%
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