Econ 101

Rank the following from the least elastic (most inelastic) to most elastic.

1-Demand for food 2-Demand for dessert 3-Demand for cookies 4-Demand for Oreos

A business should ___________ (increase/decrease) the price of a good with an inelastic demand if it wants to increase revenues.

Increase

Prices should be ___________ (increased/decreased/not changed) in the winter and ___________ (increased/decreased/not changed) in the summer. ​[Image description: The two tables below show the demand (prices and quantities) for movie tickets in the winter and summer.] Picture Graph

Increased;Decreased

If you were selling a product with an elasticity of 1.6 and you wanted to increase your revenue, what should you do to the price?

Lower the price

If demand were elastic, an increase of 10 percent in the price might cause a 20 percent decrease in quantity demanded. What would happen to the total revenue in this case?

Revenues rise by 10 percent due to the increase in price and fall by 20 percent due to the lost sales. The total revenues would decline.

Compare the likely elasticity of demand for a college education with the likely elasticity of demand for a degree at one specific institution.

Similar reasoning is appropriate here. Demand for a product will always tend to be less elastic than the demand for a specific brand of the same product. There are more substitutes for a specific brand, and thus the specific brand demand should be more elastic, so the demand for a degree at a specific institution will be more elastic than the demand for a degree.

List some things that influence how sensitive you are to changes in the prices of goods and services you purchase.

The number of substitutes for the good.Your interpretation of how necessary the good is.The percentage of your income spent on a good.The length of time you have to adjust your purchases.

What would happen to the store's total revenue with this 10 percent price increase if quantity falls by 5 percent?

What would happen to the store's total revenue with this 10 percent price increase if quantity falls by 5 percent?

A business should ___________ (increase/decrease) the price of a good with an elastic demand if it wants to increase revenues.

decrease

Assume that the elasticity of demand is 1.6. Is demand elastic or inelastic?

elastic