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Question 1 2 pts If demand is price inelastic, then the demand curve is very flat. buyers respond substantially to a change i
Question 2 2 pts Which of the following is likely to have the most price elastic demand? doctors visits diamond earrings sal
Question 3 2 pts Suppose an airline determines that its customers traveling for business have inelastic demand and its custom
Question 4 2 pts For which pairs of goods is the cross-price elasticity most likely to be negative? automobiles tires and cof
Question 5 2 pts For which of the following goods is the income elasticity of demand likely highest? housing natural gas diam
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Answer #1

1. Option 3. Buyers do not respond much to a change in price.

Explanation: In the case of inelastic demand, the % change in quantity is lower than the % change in price.

2. Option 2. Diamond earrings

Explanation: Diamond earrings is a luxury product.

3. Option 2. Decrease the price charged for vacationers and increase the price charged for business travelers

Explanation: If demand is elastic, lowering the price increases revenue. If demand is inelastic, increasing the price increases revenue.

4. Option 3. Peanut butter and jelly

Explanation: The cross price elasticity of complements is negative.

5. Option 3. Diamonds

Explanation: Diamond is a luxury good.

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