The producer of X is contemplating a price change and has asked for your advice. After some empirical investigation, you conclude that the price elasticity of demand for X is 0.75. Your advice to the producer is to
Increase price to raise total revenue.
Decrease price to raise total revenue.
Leave price unchanged since it will not influence total revenue.
Question 10 5.34 points Save
If total revenue falls as a result of a fall in price, it follows that demand is
Inelastic
Elastic
Unit Elastic
Question 11 5.34 points Save
A 25% decrease in the price of breakfast cereal leads to a 20% increase in the quantity of cereal demanded. As a result:
total revenue will decrease.
total revenue will increase.
total revenue will remain constant.
the elasticity of demand will increase.
Question 12 5.34 points Save
The price elasticity of demand coefficient for herbal tea is estimated to be equal to 0.5. It is expected, therefore, that a 10% decrease in price would lead to:
a 5% decrease in the quantity of herbal tea demanded.
a 5% increase in the quantity of herbal tea demanded.
a 10% decrease in the quantity of herbal tea demanded.
a 10% increase in the quantity of herbal tea demanded.
a 0.5% increase in the quantity of herbal tea demanded
Question 13 5.34 points Save
If policymakers desire to reduce the quantity of water demanded by 20%, and water has an elasticity coefficient of .5, then the price of water must be
increased by 10%
increased by 20%
increased by 40%
reduced by 10%
increased by 60%
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Question 10: If total revenue falls as a result of a fall in price, it follows that demand is:
The answer is elastic.
To determine the elasticity of demand, we need to look at the relationship between price and quantity. If a decrease in price leads to a decrease in total revenue, it means that the percentage change in quantity is greater than the percentage change in price. This indicates that demand is responsive to price changes, meaning it is elastic.
Question 11: A 25% decrease in the price of breakfast cereal leads to a 20% increase in the quantity of cereal demanded. As a result:
The correct answer is total revenue will increase.
To determine the impact on total revenue, we need to consider the relationship between price and quantity demanded. A decrease in price of 25% leads to an increase in quantity demanded of 20%. Since the percentage change in quantity is larger than the percentage change in price, total revenue will increase.
Question 12: The price elasticity of demand coefficient for herbal tea is estimated to be equal to 0.5. It is expected, therefore, that a 10% decrease in price would lead to:
The correct answer is a 5% increase in the quantity of herbal tea demanded.
The price elasticity of demand coefficient measures the responsiveness of demand to price changes. In this case, a coefficient of 0.5 indicates that a 1% decrease in price would lead to a 0.5% increase in quantity demanded. Therefore, a 10% decrease in price would result in a 5% increase in the quantity of herbal tea demanded.
Question 13: If policymakers desire to reduce the quantity of water demanded by 20%, and water has an elasticity coefficient of 0.5, then the price of water must be:
The correct answer is increased by 40%.
To reduce the quantity of water demanded by 20%, the price needs to be changed in the opposite direction. Since the elasticity coefficient is 0.5, which indicates an inelastic demand, a 1% increase in price would result in a 0.5% decrease in quantity demanded. To achieve a 20% decrease in quantity demanded, the price must be increased by 40% (since 0.5% x 40 = 20%).