Question 1

What happens in the case of perfectly inelastic demand

Accepted Answer

In the case of perfectly inelastic demand, the quantity demanded stays the same regardless of price changes. This means that consumers are willing to pay any price for the product or service because they perceive it as a necessity or because there are no close substitutes available. As a result, changes in price do not have an effect on the quantity demanded.

Question 2

What is the slope of a perfectly inelastic demand curve,and why

Accepted Answer

A perfectly inelastic demand curve means that the quantity demanded does not change, regardless of changes in price. Thus, the demand curve is vertical, indicating that buyers will purchase the same amount whether the price rises or falls. Therefore, the slope of a perfectly inelastic demand curve is zero because it is a vertical line.

Question 3

If a demand curve has a zero elasticity,which statement best describes the curve

Accepted Answer

When the demand curve has a zero elasticity, it means that there is no change in quantity demanded even if there is a change in price. This type of demand is called perfectly inelastic demand, and it is depicted by a vertical demand curve.

Question 4

As elasticity of demand increases,what happens to the demand curve

Accepted Answer

As elasticity of demand increases, the demand curve becomes flatter, indicating that quantity demanded is more responsive to price changes, and the price elasticity of demand becomes greater than 1.

Question 5

Suppose the price elasticity of demand for basketballs is 1.2.What will result from a 20 percent increase in price

Accepted Answer

Price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price. With an elasticity of 1.2, a 20% increase in price will lead to a 24% decrease in quantity demanded (1.2 * 20% = 24%).

Question 6

What happens in the case of perfectly inelastic demand

Accepted Answer

In the case of perfectly inelastic demand, the quantity demanded does not change for any change in price. This means that the demand curve is vertical, indicating that consumers are willing to pay a fixed amount for the product regardless of its price. Examples of goods with perfectly inelastic demand include life-saving medicines or certain types of fuel where consumers have no other options but to purchase the product at its current price.

Question 7

You are in charge of the local city-owned golf course.You need to increase the revenue generated by the golf course in order to meet expenses.The mayor advises you to increase the price of a round of golf.The city golf course manager recommends reducing the price of a round of golf.What is the reason for their disagreement

Accepted Answer

The mayor suggests raising the price of a round of golf, which implies that he believes demand is inelastic (meaning that despite an increase in price, demand will stay relatively stable). The city golf course manager recommends reducing the price of a round of golf, indicating that they believe demand is elastic (that price changes will significantly affect demand). Thus, they are in disagreement about the elasticity of demand.

Question 8

What does a perfectly inelastic demand imply

Accepted Answer

A perfectly inelastic demand implies that the quantity demanded does not change regardless of price changes, meaning buyers purchase the same amount whether the price rises or falls.

Question 9

As the price elasticity of demand decreases,what happens to the slope of the linear demand curve

Accepted Answer

When the price elasticity of demand decreases, the demand becomes less responsive to changes in price, which means that consumers are less likely to change their consumption habits when prices change. This reflects a steeper demand curve, as the change in quantity demanded becomes smaller for a given change in price. Therefore, the correct choice is C: The demand curve will be steeper through a given point.

Question 10

The federal government is proposing legalization of marijuana.If it becomes legal,it is likely that there would be an increase in the supply of marijuana.Advocates of marijuana legalization argue that this would significantly reduce the amount of revenue going to the criminal organizations that currently supply marijuana.What do these advocates believe about marijuana

Accepted Answer

The answer of The federal government is proposing legalization of...

Question 11

When quantity moves proportionally the same amount as price,what can be said of demand and its price elasticity

Accepted Answer

When quantity demanded changes by the same percentage as the change in price, demand is unit elastic, and the price elasticity of demand is 1.

Question 12

Get Smart University is contemplating increasing tuition to increase revenue.What must the school believe

Accepted Answer

If the school is contemplating increasing tuition to increase revenue, they must believe that the demand for university education is inelastic. This means that students are not very sensitive to changes in price and are still willing to pay a higher tuition to attend the university. If the demand were elastic, the increase in tuition would lead to a decrease in the number of students attending, resulting in a decrease in revenue.

Question 13

What best describes the direction of a perfectly elastic demand curve

Accepted Answer

A perfectly elastic demand curve is horizontal, which means that any increase in price will result in no demand from consumers, while any decrease in price will cause an unlimited increase in demand.

Question 14

What does a perfectly elastic demand imply

Accepted Answer

A perfectly elastic demand implies that consumers will only purchase at a specific price, and any increase in price will cause the quantity demanded to drop to zero.

Question 15

When small changes in price lead to infinite changes in quantity demanded,can be said of demand

Accepted Answer

When small changes in price lead to infinite changes in quantity demanded, it means that consumers are very sensitive to changes in price and will only purchase the good at a specific price point. This type of demand is known as perfectly elastic and will be horizontal on a demand curve.

Question 16

Suppose a producer is able to separate customers into two groups,one having a price inelastic demand and the other having a price elastic demand.If the producer's objective is to increase total revenue,what should she do

Accepted Answer

When a producer faces customers with price inelastic demand, it means that customers are willing to pay a higher price for the product. Therefore, the producer can increase the price charged to these customers without significant decreases in demand, leading to an increase in revenue. On the other hand, customers with price elastic demand are more sensitive to price changes, and a decrease in price will likely result in an increase in demand, leading to an increase in revenue. Therefore, decreasing the price charged to customers with price elastic demand and increasing the price charged to customers with price inelastic demand is the best choice to increase total revenue.

Question 17

Suppose that you are in charge of pricing at a local sandwich shop.The business needs to increase revenue and your job is on the line.What should you do

Accepted Answer

If the demand for sandwiches is elastic, decreasing the price of sandwiches will increase the quantity demanded, leading to an increase in total revenue. This will help the business to make more money, and in turn, secure your job. However, if the demand for sandwiches is inelastic, decreasing the price may not have a significant impact on increasing revenue, so it is best not to change the price at all.

Question 18

Suppose that when the price of corn is $2 per bushel,farmers can sell 12 million bushels.When the price of corn is $3 per bushel,farmers can sell 10 million bushels.Which of the following statements describes what will happen and why

Accepted Answer

The fact that the quantity demanded of corn decreases from 12 million bushels to 10 million bushels when the price increases from $2 to $3 indicates that the demand for corn is price inelastic. Therefore, an increase in the price of corn will lead to an increase in the income of corn farmers because the decrease in quantity demanded will not be significant enough to offset the increase in price, resulting in a net increase in revenue for the farmers. Option A and B are incorrect because the question does not provide any information regarding the income elasticity of demand for corn. Option D is incorrect because the question explicitly states that the demand for corn is price inelastic.

Question 19

You have just been hired as a business consultant to determine what pricing policy would be appropriate in order to increase the total revenue of an online clothing store.What would your first step be

Accepted Answer

The first step in determining the appropriate pricing policy would be to determine the elasticity of demand for the store's products. This will help the business consultant understand how sensitive customers are to changes in price and how much revenue can be generated from different pricing strategies. Simply increasing the price of everything in the store or suggesting the purchase of a new line of clothing are not necessarily effective strategies without first understanding the demand for the current products. Additionally, looking for ways to cut costs and increase profit may not necessarily lead to an increase in total revenue if it reduces the perceived value or quality of the products.

Question 20

As the price elasticity of demand increases,what happens to the slope of the linear demand curve

Accepted Answer

As the price elasticity of demand increases, demand becomes more responsive to changes in price which makes the curve flatter through a given point. A steeper slope indicates less responsiveness to price changes, so option D is incorrect. Option A and C are not accurate descriptions of what happens to the slope of the demand curve.

Quiz 5: Elasticity and Its Application

What happens in the case of perfectly inelastic demand

What is the slope of a perfectly inelastic demand curve,and why

If a demand curve has a zero elasticity,which statement best describes the curve

As elasticity of demand increases,what happens to the demand curve

Suppose the price elasticity of demand for basketballs is 1.2.What will result from a 20 percent increase in price

What happens in the case of perfectly inelastic demand

What does a perfectly inelastic demand imply

As the price elasticity of demand decreases,what happens to the slope of the linear demand curve

When quantity moves proportionally the same amount as price,what can be said of demand and its price elasticity

Get Smart University is contemplating increasing tuition to increase revenue.What must the school believe

What best describes the direction of a perfectly elastic demand curve

What does a perfectly elastic demand imply

When small changes in price lead to infinite changes in quantity demanded,can be said of demand

Suppose a producer is able to separate customers into two groups,one having a price inelastic demand and the other having a price elastic demand.If the producer's objective is to increase total revenue,what should she do

Suppose that you are in charge of pricing at a local sandwich shop.The business needs to increase revenue and your job is on the line.What should you do

Suppose that when the price of corn is $2 per bushel,farmers can sell 12 million bushels.When the price of corn is $3 per bushel,farmers can sell 10 million bushels.Which of the following statements describes what will happen and why

You have just been hired as a business consultant to determine what pricing policy would be appropriate in order to increase the total revenue of an online clothing store.What would your first step be

As the price elasticity of demand increases,what happens to the slope of the linear demand curve