When demand is inelastic a decrease in price will cause


1. When demand is inelastic, a decrease in price will cause a. an increase in total revenue. b. a decrease in total revenue. no change in total revenue but an increase in quantity demanded. no change in total revenue but a decrease in quantity demanded. c. d. 12. For which of the following types of goods would the income elasticity of demand be positive and relatively large? a. all inferior goods b. all normal goods c. goods for which there are many complements d. luxuries 13. Which of the following should be held constant when calculating an income elasticity of demand? a. the quantity of the good demanded b. the price of the good c. income d. All of the above should be held constant. 4. Suppose goods A and B are substitutes for each other. We would expect the cross-price elasticity between these two goods to be a. positive. b. negative c. either positive or negative. It depends whether A and B are normal goods or inferior goods. d. either positive or negative. It depends whether the current price level is on the elastic or inelastic portion of the demand curve. 5. As price elasticity of supply increases, the supply curve a becomes flatter b. becomes steeper c. becomes downward sloping. d. shifts to the right.

Answer

Ans : 11. (b) a decrease in total revenue — If demand is inelastic, an increase in price will increase total revenue while a price decrease will decrease total revenue. In economics, an inelastic demand is a demand whose percentage change is less than a percentage change in price. 12. (b) all normal goods — Mostly all the normal goods have a positive income elasticity of demand. In economics, a normal good is any good for which demand increases when income increases. People tend to buy more of normal goods when their income rise, thus creating a positive income elasticity of demand. 13. (b) the price of the good — The price of the good should always be held constant while calculating the income elasticity of demand. The income elasticity of demand is basically the responsiveness of the quantity demanded for a good to a change in consumer income. 14. (a) positive — In case the two goods are substitutes for each other like Pepsi and Coke, the cross price elasticity will be positive, i.e. if the price of one good increases then the demand for other substitute good also increases. The cross elasticity of demand measures the responsiveness in the quantity demanded of one good when the price for another good changes which in case of substitute goods is positive. 15. (a) becomes flatter — As the price elasticity of supply rises, the supply curve gets flatter, which shows that the quantity supplied responds more to changes in the price. Generally, a good with high price elasticity of supply has a flatter, upward-sloping curve whereas a good with a low elasticity of supply has a steeper curve. Best of luck !! Keep Chegging !!

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