Review Quiz
Elasticity
1. The US economy has had a history of booms and busts. During these income cycles, in which of the following markets do you expect to see the largest fluctuations in demand?
2. We have talked about the factors that effect the price elasticity of demand which should allow you to provide some ball-park estimates of elasticity. For which of the following products do you expect to see the lowest price elasticity of demand?
3. If the price elasticity of demand is -.5 and you wanted the output sold by a company to increases 6 percent, what would you suggest as a price strategy?
4. If you expect demand for your product to fall 10 percent when you raise the price by 5 percent, your estimate of the price elasticity of demand is:
5. Apple and IBM computers have long been viewed as substitutes for those looking for computers. What do you think was the most likely impact on demand for Apple machines of the Windows operating system that allowed the IBM to look very much like the user friendly Apple?
6. If the price elasticity of demand is -3 and the price strategy is to decrease price by 12 percent what would happen to the output sold by a company?
7. What would you expect the price elasticity of demand to be if when the price of your product is raised by 10%, demand for your product will fall by a factor of 15%?
8. If the price elasticity of demand is -2, the revenue earned by a company that increases output by 5 percent will:
9. The Brazilian government has been known to burn part of the coffee harvest to revenue earned from selling coffee. This would be a reasonable strategy if:
10. Who do you think would be least successful at raising sin tax revenue by raising their sin taxes?
11. If you expect demand for your product to fall 10 percent when you raise the price by 5 percent, your best strategy for raising revenue by 6 percent would be to: