1) no substitutes exist for some goods
2) some consumers will be unable to afford very high prices with given incomes
3) at low prices, consumers always want a lot
4) consumers are willing to pay any price for certain goods
5) the prcies of certain goods do not change
Question 39- the more broadly a good is defined,
1) the more subs/ is has so the more elastic is its demand
2) the fewer subs. it has so the more elastic is its demand
3) the more subs it has so the less elastic is its demand
4) the fewer substitutes it has so the less elastic is its demand
5) the more complements it has so the more elastic its demand
40) a firm believes it can increase its profits if it increases it revenue. if the price elasticity of demanv is 1.88 the firm should
1) increase its price
2_decrease price
3)change price by 88 percent
d) leave price unchanged
Answers:
You need to understand these concepts (elastic/inelastic demand etc). To answer these questions :-
1) Draw an elastic demand curve
2) Draw an inelastic demand curve
3) Apply each of the alternative answers to the various questions.
4) Put yourself in the situations suggested by some alternatives - an economy is just a collection of individuals. eg, if the price of something fell would you buy much more (eg bread - how much can you eat?).
APPLY what you have been taught. Your learning will be complete.
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