Overview
Below are 15 questions for Week #3's assignment on Chapter 6 - Price Elasticity of Demand.
INSTRUCTIONS: Read each question carefully and simply provide "answers" to each one of the 15 questions in this assignment; no need to show any mathematical steps. Be sure to place a number in front of each question when submitting your assignment. NOTE: For some questions that require the submission of 2 answers, both must be correct in order to receive full credit as there is NO partial credit.
Again, no need to provide details and no need to show any calculations. So if you are ready, let's do it. Here we go:
========================================================================================
#1: A bookstore's price elasticity of demand is -2.5 and it should therefore raise the price level of its product in order to raise total revenue. Yes or No?
#2: A firm's price elasticity of demand is -0.25 and it should therefore raise the price level of its product in order to raise total revenue. Yes or No?
#3: If a firm's percentage change in quantity demanded is greater than percentage change in the price level, it is encountering an inelastic demand and it should raise the price level of its product in order to raise total revenue. Yes or No?
#4: The area under a firm's demand curve is total profit. Yes or No?
#5: IBM's price elasticity of demand is -1.25; and last year it sold 4,600 units of its high-end laptop at $2,500 each. Due to the rising cost of production in 2023 by approximately 7.5%, the company expects units sold to go down by how many percent? Answer in percentage.
#6: Using information in #5 above, the company expects to be able to sell how many units in 2023? Answer in units.
#7: What is a firm's price elasticity of demand IF its demand curve is perfectly inelastic?
#8: To maximize total revenue, a firm should keep producing until its price elasticity of demand is WHAT number?
#9: As one moves down along a straight-line downward-sloping demand curve, price elasticity of demand changes from Elastic to Unitary Elastic to Inelastic. True or False?
10: One of the determinants of price elasticity of demand is the "availability of close substitutes." The more the substitutes a product has, the greater the degree of elasticity. True or False
11. Given the following prices and quantities along a given demand curve: P1 = $25; Q1 = 40; P2 = $56; Q2 = 35. The firm's price elasticity of demand is ____; and it should ____ (raise / lower / keep the price unchanged) in order to raise the firm's total revenue.
12, If a firm's cross elasticity of demand between two goods is 1.25, they are considered ____ (substitute goods / complementary goods / normal goods / inferior goods).
13. If a firm's income elasticity of demand is -3.5, the product in question is considered a/an ____ (substitute good / complementary good / normal good / inferior good).
14. Using the information in #13 above. Assuming consumers' income increase by 2%, it means that sales of the said product would ____ (increase / decrease) by ____%.
15. Finally, using the information in #12 above. Assuming the price of good A were to increase by 2%, sales of good B would ____ (increase / decrease) by ____%.
Requirements: