Question 1

The responsiveness or the sensitivity of consumer demand to changes in price is referred to as _____and occurs when consumers buy more or less of a product when the price changes.

Accepted Answer

The description provided in the question refers to elasticity of demand, which is measured by the percentage change in the quantity demanded in response to a percentage change in price. When a relatively small change in price produces a large change in quantity demanded, demand is said to be elastic. When a relatively large change in price produces only a small change in quantity demanded, demand is said to be inelastic. Therefore, the correct answer is option E, elasticity of demand.

Question 2

Most demand curves slope:

Accepted Answer

For most products when prices increase,demand will decrease.

Question 3

Critics claim bank ATMs take advantage of the _____ of customers who suffer a poverty of time and have a strong need for convenience.

Accepted Answer

An inelastic demand schedule means that the demand for a product or service does not fluctuate much with changes in price. Bank ATMs take advantage of the inelastic demand of customers who value convenience and speedy transactions, even though they may incur additional fees for using out-of-network ATMs.

Question 4

Procter & Gamble dropped the price of Pringle Potato Chips in the Southeast due to price competition and consumer demand.As a result of the price reduction,Procter & Gamble increased unit sales and earnings by 10 percent due to:

Accepted Answer

The increase in unit sales and earnings can be attributed to the concept of elasticity of demand, meaning that as price decreases, demand increases. This resulted in consumers buying more Pringle Potato Chips, leading to an increase in unit sales and earnings for Procter & Gamble. There is no mention of price-wars, supply and demand increases, price demand determinants, or market share fluctuations in the given information.

Question 5

When price decreases and total revenue falls,demand is:

Accepted Answer

This is characteristic of inelastic demand,which means that an increase or decrease in price will not significantly affect the demand for the product.

Question 6

The ______ is the quantity of products that will be sold in the market at various prices for a specified time period,and _____ is the quantity of a product that will be offered to the market by suppliers at various prices for a specified period.

Accepted Answer

Demand is the quantity of products that consumers are willing and able to buy at different prices, while supply is the quantity of products that producers are willing and able to offer at different prices. Therefore, the correct pair of terms is demand and supply, which is described in option B.

Question 7

A bakery supply catalog sells 5-pound bags of moist apricots and cranberries,sweet dates,bits of pineapple,and candied cherries to be used in fruitcakes.Each bag costs $24.95.If the price of cranberries were to increase by 5 percent,it would have no effect on the price of the fruit mix because cranberries are only one of several fruits in the package.The demand for cranberries for this particular use is:

Accepted Answer

The price increase of cranberries would not have any significant effect on the price of the fruit mix. This suggests that the demand for cranberries is inelastic.

Question 8

What happens when demand is elastic?

Accepted Answer

When demand is elastic, a change in price will have a proportional change in the quantity demanded. This means that as price increases, consumers will be more likely to seek out cheaper alternatives, reducing overall demand and revenue. Conversely, lowering prices will increase demand, but not enough to make up for the loss in price per unit, resulting in decreased revenue overall. Therefore, as price goes up, revenue goes down when demand is elastic.

Question 9

_____ use complex mathematical software to profitably fill unused capacity.

Accepted Answer

Yield management systems use complex mathematical software to analyze data and determine the best pricing and inventory allocation strategies, in order to maximize profits by filling unused capacity. Capacity correlation systems and service forecasting tools may be components of yield management systems, but are not standalone systems themselves. Service management systems focus on managing customer interactions and service delivery, rather than optimizing capacity utilization. Capacity management software may also be used to optimize utilization, but it does not necessarily involve the complex mathematical algorithms used in yield management systems.

Question 10

When Richard opened The Kite Hut,he charged $7 for kites and could not keep up with the demand.The Kite Hut has raised the price to $10,and now Richard is still selling all the kites he carries,but he is not forced to reorder on a daily basis.The $10 price is probably a(n):

Accepted Answer

The $10 price is likely a price equilibrium, where the supply and demand for kites have found a balance. Richard is selling all the kites he carries but is not constantly having to restock due to increased demand. This suggests that the price is high enough to both cover costs and generate profit while not being so high that customers are no longer willing to buy kites. Therefore, the price is likely in equilibrium. The other choices do not accurately describe the situation described in the scenario.

Question 11

Dosta Mattress Company manufactures and sells mattresses to retailers who then put their own store brand names on the product.At a price of $100,it sold 100 mattresses.It dropped its price to $60 and sold 175 mattresses.Regarding elasticity,demand for the mattresses is:

Accepted Answer

The decrease in price from $100 to $60 led to an increase in quantity demanded from 100 to 175, which shows a relatively large response to the change in price. This indicates that the demand for the mattresses is elastic.

Question 12

Which of the following factors does NOT directly affect the elasticity of demand?

Accepted Answer

The inputs needed to manufacture a product do not directly affect the elasticity of demand. Elasticity of demand depends on how responsive consumers are to changes in price, which is influenced by factors such as availability of substitutes, consumer purchasing power, and durability of the product. The other uses of a product can also affect elasticity, as it may reduce or enhance the need for the product or create alternative uses for it.

Question 13

At a price of $6 each,314 people want to buy sun visors designed especially for volunteers at the Peachtree Road Race,and only 314 such shirts were available.In this example,a state of _____ has been achieved.

Accepted Answer

Price equilibrium has been achieved because the price of $6 is the point at which the quantity demanded (314) equals the quantity supplied (314), resulting in no excess demand or excess supply. It is the point where the market clears and there is no pressure for a change in price.

Question 14

_____ is defined as the quantity of product offered to the market by suppliers at various prices for a specified period.

Accepted Answer

The quantity of product offered to the market by suppliers at various prices for a specified period is known as supply.

Question 15

When consumers are sensitive to price changes,______ occurs.

Accepted Answer

Elastic demand occurs when consumers are sensitive to price changes, meaning that even small price changes will result in a significant change in the quantity demanded. This is in contrast to inelastic demand, where price changes have little effect on the quantity demanded. Elastic demand is often seen in goods or services that have substitutes or alternatives readily available.

Question 16

Concha y Toro,a Chilean wine,has reduced the price of one bottle from $10 to $8.It previously sold 420 bottles in the month prior to the price reduction,and it now sells 525 bottles per month.It is experiencing:

Accepted Answer

The answer of Concha y Toro,a Chilean wine,has reduced the...

Question 17

When Plantation Manufacturing Company lowered the price of its patio sets from $1,100 to $850,demand doubled from 4 units sold per month to 8 units per month.However,total revenue dropped.This is an example of:

Accepted Answer

The demand is inelastic because the percentage decrease in price led to a smaller percentage increase in quantity demanded, resulting in a drop in total revenue.

Question 18

In a discount store Lee found a "sun kit" containing a beach towel,a sun visor,and suntan lotion.The items,which were sold together,retailed at $18.50,but were marked down to $12.99.The retailer sold one for $18.50 and six at the $12.99.Demand for the sun kit package is:

Accepted Answer

Demand is elastic because the price reduction from $18.50 to $12.99 resulted in a significant increase in the quantity sold, from one unit to six units.

Question 19

The point at which there is no inclination for the price to rise or fall is called price:

Accepted Answer

Equilibrium is the point where the supply and demand for a particular product are equal, resulting in no inclination for the price to rise or fall. This represents a balance between the quantity of goods buyers are willing to purchase, and the quantity of goods that are available for sale at a certain price level. Choice B) stability, while related, does not capture the concept of balance between supply and demand. Choices C), D), and E) are not directly relevant.

Question 20

_____ occurs when an increase in sales exactly offsets a decrease in price so that total revenue remains exactly the same.

Accepted Answer

Unitary elasticity occurs when a change in price results in an equal percentage change in quantity demanded, leading to a constant total revenue. In other words, the increase in sales offsets the decrease in price, resulting in the same revenue.

Quiz 17: Pricing Concepts