solution

Explain how your knowledge of elasticity would help you give the correct advice to increase total revenue

$10.00

When the price is below equilibrium, how will the market return to equilibrium?

 

SKU: solviv5

Multiple Choice Questions.

Q1  The demand curve for concert tickets for the heavy metal band “Mum’s Worry” would show:

a) the number of tickets willing to be sold at the box office at various prices

b) the number of tickets that are needed

c) the quality of the people who are willing and able to purchase tickets

d) the number of tickets that are willing to be purchased

 

 

Q2 Demand is the relationship between two economic variables:

a) the cost of a particular good and the quantity of the good produced.

b) the cost of a particular good and the quantity of the good consumers are willing to buy.

c) the price of the particular good and the price consumers are willing to pay.

d) the price of a particular good and the quantity of the good consumers are willing to buy.
Q3  When the price is below equilibrium, how will the market return to equilibrium?

a) Supply will decrease and demand will increase

b) Supply will increase and demand will decrease

c) The quantity supplied will increase and the quantity demanded will decrease

d) The quantity demanded will increase and the quantity supplied will decrease

 

 

Q4  If a 15 per cent change in price results in a 7.5 per cent change in quantity demanded, the price elasticity of demand is …………………………… and demand is …………………………….

a) 2; elastic

b) 0.5; elastic

c) 0.5; inelastic

d) 1; unit elastic

 

 

Q5  If fish and chips are considered to be close complements, the cross elasticity of demand between the 2 goods will be

a) equal to zero

b) negative and high

c) positive and high

d) equal to one

 

 

Q6  Which of the following is the cause of an increase in total revenue?

a) Price increases when demand is elastic

b) Price decreases when demand is elastic

c) Price increases when demand is unit elastic

d) Price decreases when demand is inelastic

 

 

Q7  If an individual’s income increases, then the demand for a normal good is:

a) decrease

b) increase

c) remain constant

d) rotate

e) fall to zero

 

 

Q8  Suppose the price of a bus ticket rises from $2.75 to $3 and the number of tickets sold falls from 10,000 to 8,500, the price elasticity of demand is:

a) elastic

b) unitary elastic

c) perfectly elastic

d) inelastic

 

 

Q9  A downward sloping demand curve will have a

a) higher price elasticity of demand coefficient along the upper half of the demand curve

b) price elasticity of demand coefficient that remains constant

c) perfectly elastic demand coefficient

d) positive slope

 

 

Q10  When the government imposes a price ceiling

a) market equilibrium is established at a lower price

b) a “black market” will develop

c) it will only have effect if the price ceiling is established above the equilibrium price

d) there will be a surplus of unsold goods

 

SHORT ANSWER QUESTIONS

Q1 Consider the market for the confectionery “Minties”. Analyse the following situations and clearly state the effect on both the price equilibrium and the quantity equilibrium. Analyse each situation separately. Use a diagram for each. i) “Fantales”, a substitute drops the price by 20% ii) incomes increase in Australia by 10% iii) confectionery industry introduce new cost saving technology (iv) “Minties” lower their price by 15% (word limit  300 words)

 

Q2  You are an economist and you have been asked to advise your company “Heaven Sent” about
pricing strategies whether they should increase (or lower) the price of the new fragrance “Summer Breeze” to increase their total revenue. You have already been advised that the Price Elasticity of Demand (PED) is 2.7. Explain how your knowledge of elasticity would help you give the correct advice to increase total revenue. Give reasons for your advice.

 

Q3          Price ($)           Quantity demanded             Quantity supplied

50                                50                                80

40                                55                                75

30                                60                                70

20                                65                                65

10                                70                                60

1a) In the above market what is the initial market equilibrium price and equilibrium quantity?

 

b) If the government sets a price floor at $50, what will be the outcome in this market?

 

c) Why would a government decide to introduce a price floor?

 

Reviews

There are no reviews yet.

Be the first to review “Explain how your knowledge of elasticity would help you give the correct advice to increase total revenue”

Your email address will not be published. Required fields are marked *