Assume that demand for product A can be expressed as QA = 500 – 5PA + 3PB and demand for product B can be expressed as QB = 300 – 2PB + PA. Currently, market prices and quantities for these goods are PA, = 5, PB = 2, QA = 481, and QB = 301.

Suppose the price of product B increases to 3. What happens to the quantity demanded of both products?

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Yusra AneesLv10

22 Mar 2021

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Suppose demand for good A is given by Qa=500-10Pa+2Pb+0.7Y where PA is the price of good A, Pb is the price of some other good b and Y is income. Assume that Pa is currently $10, Pb is currently $5 and Y is currently $100.
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1. The concept of price elasticity of demand measures:

a. the slope of the demand curve.

b. the number of buyers in a market.

c. the extent to which the demand curve shifts as the result of a price decline.

d. the sensitiveness of quantities demanded to price changes.

2. When the percentage change in price is less than the resulting percentage change in quantity demanded:

a. demand is elastic.

b. demand is inelastic.

c. demand is unit elastic.

d. none of the above.

3. The elasticity of demand:

a. will be the same at each price-quantity combination on a stable demand curve.

b. tends to be elastic in high-price ranges and inelastic in low-price ranges.

c. tends to be inelastic in high-price ranges and elastic in low-price ranges.

d. is infinitely large for a perfectly inelastic demand curve.

4. Suppose that as the price of Y falls from $2.00 to $1.80 the quantity of Y demanded increases from 110 to 121. It can be concluded that the price elasticity of demand is: _______.

5. Total revenue rises as the price of a good increases if price elasticity of demand is:

a. unitary elastic

b. perfectly inelastic.

6. The demand for such products as salt, bread, and electricity tend to be:

a. relatively price elastic.

b. relatively price inelastic.

c. of unit price elasticity.

d. perfectly price elastic.