Practice Questions
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If a firm increases the price of its product and the quantity demanded decreases significantly due to the availability of substitutes, how is the price elasticity of demand for that product characterized?
When the price goes up and people buy much less, demand is elastic. Other options are incorrect because Some might think inelastic means demand stays ...
If a product has a price elasticity of demand greater than 1, how will a decrease in price affect total revenue?
When demand is elastic, a small price drop leads to a big increase in sales. Other options are incorrect because Some might think lowering the price a...
If a product has inelastic demand, how would an increase in consumer income typically affect its revenue, assuming that the income elasticity of demand for the product is positive?
When demand is inelastic, people buy the same amount even if prices go up. Other options are incorrect because Some might think that higher income mea...
A company sells a product at a price of $20 and finds that the demand is elastic. If the company raises the price to $25, what is the likely effect on total revenue?
When demand is elastic, people buy much less if the price goes up. Other options are incorrect because Some might think higher prices always mean more...
How does the price elasticity of demand affect total revenue for luxury goods when their prices increase, and how does this relate to cross-price elasticity with substitute goods?
When luxury goods have elastic demand, a price increase leads to a big drop in sales. Other options are incorrect because This answer suggests that lu...
If the price of a product decreases and the quantity demanded increases significantly, what does this indicate about the price elasticity of demand for that product?
When the price goes down and people buy a lot more, it shows that they really want the product. Other options are incorrect because Some might think i...
If the price of a product decreases and leads to an increase in total revenue, the demand for that product is classified as what type of elasticity?
When the price goes down and sales go up, people really want the product. Other options are incorrect because Some might think that lower prices alway...
If a product has elastic demand, what is the expected impact on total revenue when the price is decreased?
When demand is elastic, people buy a lot more if the price drops. Other options are incorrect because Some might think lowering the price means less m...
A local coffee shop notices that when it lowers the price of its premium coffee from $4.50 to $3.50, the quantity sold increases significantly, leading to higher total revenue. Which of the following statements best explains why this price change resulted in increased revenue?
When the price goes down, more people want to buy the coffee. Other options are incorrect because Some might think that lowering prices always helps s...
Arrange the following steps in the correct order to analyze the impact of a price decrease on total revenue when a firm operates in the elastic range of its demand curve: A) Evaluate the elasticity of demand at the current price level, B) Implement a price decrease, C) Analyze changes in quantity demanded, D) Assess the effect on total revenue.
First, we need to check how sensitive customers are to price changes. Other options are incorrect because This option suggests analyzing quantity dema...
If a company lowers the price of its product and observes a significant increase in total revenue, what is the most likely underlying reason for this effect?
When demand is elastic, a small price drop leads to a big increase in sales. Other options are incorrect because Some might think that lower productio...
Price elasticity of demand is to total revenue as consumer surplus is to what?
Consumer surplus is the benefit buyers get from paying less than they would. Other options are incorrect because Some might think deadweight loss is s...
If a firm decreases the price of a product in the elastic range of its demand curve, what is the expected impact on total revenue?
When a firm lowers the price in the elastic range, more people want to buy the product. Other options are incorrect because Some might think lowering ...
When a firm operates in the elastic portion of the demand curve, a decrease in price will lead to a large change in total revenue because the price elasticity of demand is considered to be ___.
When demand is elastic, a small price drop causes a big increase in sales. Other options are incorrect because Some might think that inelastic means s...
A firm is currently operating in the elastic range of its demand curve. It decides to lower its price significantly. What is the most likely outcome regarding total revenue and why?
When a firm lowers its price in the elastic range, more people want to buy the product. Other options are incorrect because This answer suggests that ...
Which of the following statements accurately describe the implications of price elasticity of demand for a firm operating in a monopolistic competition? Select all that apply.
Other options are incorrect because This suggests that lowering prices will always help sales; This implies that a price drop always leads to a big in...
If a firm decreases the price of a product in the elastic range of its demand curve, what is the expected effect on total revenue?
When the price goes down in the elastic range, more people want to buy the product. Other options are incorrect because Some might think lowering the ...
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