Suppose that the price of one product increases from $11 to $42. As a result, the quantity demanded for another product changes from 260 to 180. Based on this information, you can tell that these two products are (select one):
a. complements
b. normal
c. substitutes
d. inferior
17. Suppose that when the store increases the price of laundry detergent from $2.50 to $3.90, the quantity demanded decreased from 210 to 130. What is the change in total revenue as a result of this price change? Make sure to include a negative sign in your answer if necessary.
18. Suppose that you know that the price elasticity of demand is 1.3. If we increase the price of this product, then the total revenue will (select one):
a. increase
b. remain unchanged
c. decrease
19. How would the following changes in price affect total revenue? That is, would total revenue increase, decrease, or remain unchanged?
a. Price falls and demand is inelastic
b. Price rises and demand is elastic
c. Price rises and supply is elastic
d. Price rises and supply is inelastic
e. Price rises and demand is inelastic
f. Price falls and demand is elastic
g. Price falls and demand is unit elastic
20. Suppose the cross-elasticity of demand for products A and B is +3.6 and for products C and D is -5.4. What can you conclude about how products A and B are related? What about products C and D?
21. The income elasticities of demand for movies, dental services, and clothing have been estimated to be +3.4, +1, and +0.5 respectively. Interpret these coefficients. What does it mean if an income elasticity coefficient is negative?
22. What are the major determinants of price elasticity of demand? Use those determinants and your own reasoning in judging whether demand for each of the following products is elastic or inelastic and explain why or how:
a. Bottled water
b. Toothpaste (Crest toothpaste)
c. Mustard
d. Diamond earrings
e. Microsoft's Windows operating system