Deck 12: Demand and Revenue Management

Question 1

Knowing demand is equivalent to knowing the

A)employee.
B)customer.
C)average investor.
D)economic profit.

Answer 1

customer.

Question 2

Demand elasticity can be

A)elastic, unit, or free.
B)elastic or inelastic.
C)elastic, inelastic, or unit elastic.
D)1, -1, or 0.

Answer 2

elastic, inelastic, or unit elastic.

Question 3

Brand name products tend to have demand curves that are relatively more inelastic because

A)brand name products tend to have more substitutes.
B)brand name products tend to have fewer substitutes.
C)consumers are very sensitive to the prices of brand names.
D)brand names are not valued.

Answer 3

brand name products tend to have fewer substitutes.

Question 4

Price elasticity of demand is defined as

A)the percentage change in the quantity demanded of some product resulting from a one percent change in price.
B)the percentage change in the quantity demanded of some product resulting from a change in price.
C)the change in quantity demanded resulting from a one percent change in price.
D)the change in quantity demanded resulting from a change in price.

Question 5

When demand is elastic

A)price and revenue move in opposite directions.
B)price and revenue are not related.
C)price and quantity demanded move in opposite directions.
D)price and revenue move in the same direction.

Question 6

In general, elasticities measure

A)the change in quantity demanded when a product attribute changes.
B)the change in consumer spending when income changes.
C)the change in an attribute for a percentage change in price.
D)the percentage change in the quantity demanded resulting from a fixed percentage change in some attribute.

Question 7

The presence of substitute goods will tend to make demand more

A)inelastic.
B)unit elastic.
C)elastic.
D)vertical.

Question 8

If something is addictive, then

A)price and demand are inversely related.
B)price elasticity of demand is equal to one.
C)demand is perfectly inelastic.
D)demand is perfectly elastic.

Question 9

If price is cut and demand is elastic, total revenue will rise because

A)the change in quantity demanded is greater than the percent change in price.
B)the percent change in quantity demanded is greater than the change in price.
C)the percent change in quantity demanded is greater than the percent change in price.
D)customers can't find substitutes.

Question 10

According to the case, price has a disproportionate effect on the bottom line relative to

A)demand changes.
B)total and fixed costs.
C)capital expenditures.
D)the cost of capital.

Question 11

If price elasticity is 3.25, then demand is

A)inelastic.
B)elastic.
C)unitary.
D)negative.

Question 12

Companies spend ____ on pricing decisions.

A)too much time
B)the right amount of time
C)too little time
D)too much money

Question 13

If price is cut and demand is elastic, then

A)total revenue will fall.
B)total revenue will not change.
C)quantity demanded will fall.
D)total revenue will rise.

Question 14

If demand is perfectly elastic,

A)the smallest increase in price will cause quantity demanded to fall to zero.
B)the smallest increase in price will cause demand to fall to zero.
C)the smallest increase in price will cause quantity demanded to fall.
D)the smallest increase in price will cause demand to fall.

Question 15

If price is cut and demand is inelastic, total revenue will fall because

A)the change in quantity demanded is less than the percent change in price.
B)the percent change in quantity demanded is less than the change in price.
C)the percent change in quantity demanded is less than the percent change in price.
D)customers can find substitutes.

Question 16

If demand is perfectly elastic, then

A)demand and price are inversely related.
B)quantity demanded and price are inversely related.
C)the demand curve is a vertical line.
D)the demand curve is a horizontal line.

Question 17

If price is cut and demand is inelastic, then

A)total revenue will fall.
B)total revenue will not change.
C)quantity demanded will fall
D)total revenue will rise.

Question 18

If price elasticity is 3.25 then

A)for every one percent change in price, there will be a 3.25 percent change in quantity demanded.
B)for every one percent change in price, there will be a 3.25 percent change in demand.
C)for every one percent change in price, there will be a 32.5 percent change in quantity demanded.
D)for every one percent change in price, there will be a .0325 percent change in quantity demanded.

Question 19

When demand is unit elastic

A)price and revenue move in opposite directions.
B)price and revenue are not related.
C)price and quantity demanded move in opposite directions.
D)price and revenue move in the same direction.

Question 20

When demand is inelastic,

A)price and revenue move in opposite directions.
B)price and revenue are not related.
C)price and quantity demanded move in opposite directions.
D)price and revenue move in the same direction.

Question 21

Products that have inelastic demand have many substitutes.

Question 22

Cross elasticity tells a manager that the product they produce is

A)a countercyclical good.
B)a cyclical good.
C)a luxury.
D)a substitute or complement to other goods.

Question 23

Assume that product X has a negative cross elasticity with respect to shoes.If the price of shoes rises

A)the demand for product X will decrease.
B)the quantity demanded for product X will increase.
C)the demand for shoes will fall.
D)the demand for product X will increase.

Question 24

Assume that product X has a positive cross elasticity with respect to shoes.If the price of shoes rises

A)the demand for product X will decrease.
B)the quantity demanded for product X will increase.
C)the demand for shoes will fall.
D)the demand for product X will increase.

Question 25

A manager can determine if her product is viewed as a normal good or an inferior good by considering

A)price elasticity.
B)cross elasticity.
C)income elasticity.
D)advertising elasticity.

Question 26

If price elasticity is less than one, then demand is said to be inelastic.

Question 27

Price elasticity

A)is impossible to calculate.
B)can only be calculated with the experience of management.
C)can be calculated with PIMS data.
D)none of these choices.

Question 28

If income elasticity is positive, a product is inferior.

Question 29

Price and total revenue move in opposite directions when demand is elastic.

Question 30

Elasticities measure the response of one variable to random shocks from unknown factors.

Question 31

If price elasticity is greater than one, then demand is said to be elastic.

Question 32

Inferior goods may also be referred to as

A)countercyclical goods.
B)cyclical goods
C)substitutes.
D)anti-luxury goods.

Question 33

Income elasticity has a range of

A)greater than or less than one.
B)greater than or less than zero.
C)greater than or less than negative one.
D)less than zero but greater than one.

Question 34

The science of "knowing the customer" is referred to as

A)revenue management.
B)reverse elasticity.
C)supply analysis.
D)equilibrium analysis.

Question 35

If demand is unit elastic, an increase in price will lead to an increase in total revenue.

Question 36

Income elasticity is defined as the

A)percentage change in the quantity demanded of a good resulting from a change in income.
B)percentage change in the demand of a good resulting from a one percent change in income.
C)change in quantity demanded resulting from a change in income.
D)percentage change in the quantity demanded of a good resulting from a one percent change in income.

Question 37

A luxury good has

A)a negative income elasticity.
B)a cross elasticity of one.
C)a very high income elasticity.
D)a negative price elasticity.

Question 38

Price and total revenue move in opposite directions when demand is inelastic.

Question 39

A perfectly elastic demand curve is a vertical line.

Question 40

Income elasticity is used to determine whether a product is a normal or inferior good.

Question 41

If cameras and film have a cross elasticity of .985, they are complements

Question 42

Computer technology has enhanced a manager's ability to "know the customer."

Question 43

A positive cross elasticity indicates a substitute relationship.