Calculating Revenue and Elasticity
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Questions and Answers

What does the Price Elasticity of Demand measure?

  • Responsiveness of sales to change in price (correct)
  • Responsiveness of one commodity to change in the price of another commodity
  • Responsiveness of sales to change in advertising expenditure
  • Responsiveness of sales to change in consumer income

    • If the quantity demanded before a price change is 2000 and after the price change is 2500, what is the percentage change in quantity demanded?

  • 20%
  • 25%
  • 10%
  • 15% (correct)

    • When computing Price Elasticity of Demand, what would a negative elasticity value indicate?

  • Inelastic demand (correct)
  • Unitary elastic demand
  • Elastic demand
  • Perfectly elastic demand

    • What does Cross Elasticity of Demand measure?

    <p>Responsiveness of one commodity to change in the price of another commodity</p> Signup and view all the answers

    Using the Total Revenue Test, when is demand considered elastic?

    <p>When total revenue decreases as price decreases</p> Signup and view all the answers

    If the quantity demanded falls by 10% when price increases by 5%, what is the Price Elasticity of Demand?

    <p>-2</p> Signup and view all the answers

    What happens to Total Revenue if demand is inelastic and price decreases?

    <p>Total Revenue increases</p> Signup and view all the answers

    How does an increase in consumer income affect the demand for normal goods?

    <p>Increases demand for normal goods</p> Signup and view all the answers

    'If two goods are complements, what happens to the cross price elasticity between them?'

    <p>'It becomes negative'</p> Signup and view all the answers

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