Question

1.A demand curve is drawn holding each of the following constant except which of the following?

A. The price of the good

B. Tastes and preferences

C. The price of substitute goods

D. Income level

2.Total revenues will decrease in which of the following scenarios?

A.   Price increase, inelastic product

B.   Price decrease, elastic product

C.   Price decrease, elastic product

D.   Price increase, unitary elastic product

3.At the farmers’ market, Jan can sell 20 bags of apples for $3 each, or 40 bags of apples if she reduces the price to $2 each. Because revenue has ________ as price decreases, Jan knows that the demand for apples is _________.

A. increased; elastic

B. increased; inelastic

C. decreased; elastic

D. decreased; inelastic

Answer 1

Answer 1; Option A.

A demand curve is drawn is holding tastes and preferences, price of substitute good and income level as constant. While price of the good is not considered constant.

Answer 2:

Total revenue will decrease when there is increase in the price of the product and demand of the good is elastic. Total revenue also decreases when there decrease in the price of product and demand is inelastic.

None of the conditions is mentioned in your options. So, recheck the options.

Answer 3:

Total revenue when price = $3 = Price * Quantity = 20 * 3 = $60.

Total Revenue when price = $2, = $80.

Revenue has increased as price increases, Thus, demand for apple is elastic.

Thus, Option A is correct.