Question

sticity of demand for its ). What happens to Steven's Soup it increases the price of its canned soup? b. It falls by 162 percent. es by 1.62 percent. d. It rises. reduce your daily rates by 20 percent. However, y at you own a small boutique hotel. In an attempt to raise revenue you this indicate about the demand for your boutique hotel rooms y rates by 20 percent. However, your revenue falls. What does a. The demand curve for your hotel rooms is vertical. The deaabout the dby 20 percent hotel. In an atte C. Bonand is inelaste for your hoor your boutique Your revenue falls. Whenue you and and curve demand forint. However, you attempt to raise otel rooms is vertic hotel rooms? c. Boutique hotel rooms are inferior goods. d. Demand is elastic. 27. A new business owner states: "The only way to increase one's revenue from selling a product is to increase the product's price." This statement is a Not true. Revenue will always decrease as the price of the product increases because quantity demanded will fall. b. Always true. c. Not true. Revenue will increase as the price of the product increases only if demand is elastic. d. Not true. Revenue will increase as the price of the product increases only if demand is inelastic. As a business owner, it is important to understand the income elasticity of demand for the item that you sell. Which of the following items is likely to have the highest income elasticity of demand? b. bottled water d. breakfast cereal a. a hamburger ca luxury cruise mes leads to a 10 pe uct is necessity. xury good. S owner Evets Anipuk notices that a 5 percent increase in consumer ads to a 10 percent decrease in quantity demanded for its product, this b an income elastic good. d. an inferior good.

Answer 1

26.

B

Decreasing the price rate, decreases the revenue, means demand is inelastic in nature and it is not increasing with decrease in price.

27.

D

Revenue increases with increase in price, when demand does not change with the change in price. It happens when demand is inelastic in nature.

28.

C

A luxury good or services will have highest income elasticity of demand.

29.

D

It happens with the inferior goods.