Question

1) The fewer the number substitutes there are for a product.

(a) the less the price elastic the demand for the product is.

(b) the more price elastic the demand for the product is.

(c) the greater the income elasticity for the product.

(d) the smaller the income elasticity for the product.

2) When people have more time to respond to price changes, demand becomes

(a) more elastic

(b) less elastic

(c) unitarily elastic

(d) neither more nor less elastic because time has no effect on demand.

3) If the owner of an ice cream store charges a $ 1.20 for an ice cream cone his total revenue is $540 a day. If he lowers the price to $ 1.00 his total revenue is $ 500 a day. The demand for the ice cream is

(a) elastic

(b) inelastic

(c) unitarily elastic

(d) neither more nor less elastic because time has no effect on demand.

4. The Bill Branch Tool Company wants to increase the quantity of tools it sells by 10%. If the price elasticity of demand is -2.5 the company must

(a) decrease price by 4.0%

(b) increase price by 4.0%

(c) decrease price by .025%

(d) increase price by .025%