Question

Which type of goods is most adversely affected by recessions?

Question 4 options:

	Goods for which the income elasticity coefficient is relatively low or negative.
	Goods for which the cross elasticity coefficient is negative.
	Goods for which the income elasticity coefficient is relatively high and positive.
	Goods for which the cross elasticity coefficient is positive. Demand is said to be _____________ when the quantity demanded is not very responsive to changes in price. Question 5 options: inelastic elastic unit elastic independent A 25 percent decrease in the price of breakfast cereal leads to a 20 percent increase in the quantity of cereal demanded. As a result: Question 6 options: total revenue will decrease. total revenue will remain constant. total revenue will increase. the elasticity of demand will increase.

Answer 1

Part 1) Goods for which the income elasticity coefficient is relatively high and positive are those goods that are most adversely affected by recessions. This is because, recession leads to decline in the income level due to which the demand for such goods declines.

Part 2) Demand is said to be inelastic when the quantity demanded is not very responsive to changes in price. This means a change in the price of a good results in very little change in the demand for the good.

Part 3) A 25 percent decrease in the price of breakfast cereal leads to a 20 percent increase in the quantity of cereal demanded. As a result, total revenue will decrease.