, Question 1
An increase in the price of a product from R25,00 to R35,00 causes the quantity
demanded to decrease from 1 400 to 1 000 units. Using the arc elasticity of demand, the
price elasticity of demand is …
a.
– 1.00
b.
0.75
c.
– 0.11
d.
1.15
Question 2
The substitution effect of a price decrease for a good with a normal difference curve
pattern is graphed by …
a.
drawing a new budget line parallel to the initial budget line but tangent to the
indifferent curve attained at the new price.
b.
doing none of the above because the substitution effect cannot be graphed.
c.
drawing a new budget line tangent to the original indifference curve but at the slope
of the new price of the good.
d.
drawing a new budget line tangent to the indifference curve attained at the new
price.
An increase in the price of a product from R25,00 to R35,00 causes the quantity
demanded to decrease from 1 400 to 1 000 units. Using the arc elasticity of demand, the
price elasticity of demand is …
a.
– 1.00
b.
0.75
c.
– 0.11
d.
1.15
Question 2
The substitution effect of a price decrease for a good with a normal difference curve
pattern is graphed by …
a.
drawing a new budget line parallel to the initial budget line but tangent to the
indifferent curve attained at the new price.
b.
doing none of the above because the substitution effect cannot be graphed.
c.
drawing a new budget line tangent to the original indifference curve but at the slope
of the new price of the good.
d.
drawing a new budget line tangent to the indifference curve attained at the new
price.
