1. A clothing retailer reduces the price of shirts from £50 to £40. As a result, quantity
demanded rises from 20,000 to 24,000 per month. What is the best estimate for price
elasticity of demand?
A –1.
B –2.5.
C +2.5.
D –2.
2. If the price elasticity of demand for coffee is –0.7 and the cross elasticity of demand
between tea and coffee is +1.1, then a 10% increase in the price of coffee will cause the
quantity demanded of coffee to;
A) fall by 7% and the demand for tea to fall by 11%
B) rise by 0.7% and the demand for tea to fall by 1.1%
C) fall by 0.7% and the demand for tea to fall by 1.1%
D) fall by 7% and the demand for tea to rise by 11%.
3. A hairdresser has 200 regular customers each week, paying $20 per haircut. He estimates that the PeD for this service is -2. As a result he decides to cut the price to $18. What would be the impact on revenue?
A) increase by $640
B) decrease by $320
C) increase by $320
D) decrease by $640
If I do this on my computer, and can't print it is that okay? :)
ReplyDeleteI think the last question may be wrong, isn't it increase by $720? I've tried it a few times now and keep getting that answer.
ReplyDeleteunless I am going mad, dont think it's $720
ReplyDelete