1. Carlos enjoys hazelnut coffee every morning. He also have a slice of banana bread every once...
Question:
1. Carlos enjoys hazelnut coffee every morning. He also have a slice of banana bread every once in a while. Assuming that there is an increase in the price of coffee and as a result Carols, made a small change in his consumption for coffee. On the other hand when the price of banana bread increases, Carlos decreases the consumption of bread by a significant amount. This example signifies the importance of
a. | a necessity versus a luxury in figuring the price elasticity of demand. | |
b. | the definition of a market in figuring the price elasticity of demand. | |
c. | having close substitutes in figuring the price elasticity of demand. | |
d. | the time horizon in figuring the price elasticity of demand. |
2.
In the case of perfectly inelastic demand, the price elasticity of demand
a. | approaches infinity, and the demand curve is horizontal parallel to X axis. | |
b. | is zero, and the demand curve is vertical parallel to Y axis. | |
c. | is zero, and the demand curve is horizontal parallel to X axis. | |
d. | approaches infinity, and the demand curve is vertical parallel to Y axis. |
3. When the initial price of cafe latte in a coffee shop is $5 per cup the quantity demanded was 120 cups and when the price was $7 per cup then 100 cups were demanded. Using the mid-point method, the price elasticity of demand is about
a. | 2.5. | |
b. | 0.1. | |
c. | 0.55. | |
d. | 1.82. |
4. A perfectly inelastic demand
a. | implies that buyers respond substantially to an increase in price. | |
b. | implies that buyers decrease their purchases when the price rises. | |
c. | implies that buyers purchase the same amount as before when the price rises or falls. | |
d. | implies that buyers increase their purchases only slightly when the price falls. |