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    Price Shift Results in Demand

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    1. Which of the following event will shift the demand for apple to the right?

    a. An increase in income
    b. An increase in the price of bananas, a substitute for apple
    c. A news release affirming that "an apple a day indeed keeps doctors away"
    d. A sudden increase in birth rate
    e. All of the above

    2. If the government imposes a price above the equilibrium price, then this price is
    called__________, which will lead to a(n) ___________.

    a. a price ceiling, excess demand
    b. a price ceiling, excess supply
    c. a price floor, excess demand
    d. a price floor, excess supply
    e. an equilibrium price, equilibrium output

    3. If the demand curve is Q P D = 100 −10 and there is $1 price increase, then the
    elasticity of demand at P=2 is ___________. (Hint: you need to calculate the quantity
    demanded at P=2 and P=3, and then apply the elasticity formula.)

    a. -0.25
    b. -0.5
    c. -0.75
    d. -1
    e. Insufficient information to derive the elasticity

    4. If the absolute value of a demand elasticity is less than 1, then

    a. the demand is inelastic, and hence a price rise will reduce the total revenue.
    b. the demand is inelastic, and hence a price rise will increase the total revenue.
    c. the demand is elastic, and hence a price rise will reduce the total revenue.
    d. the demand is elastic, and hence a price rise will increase the total revenue.
    e. there is no information on the change of total revenue after a price rise.

    5. If the cross-price elasticity is negative, then the two goods are ___________.

    a. unrelated
    b. substitutes
    c. complements
    d. normal goods

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    https://brainmass.com/business/business-management/price-shift-results-demand-262175

    Solution Summary

    This solution correctly identifies the answer to questions touching on demand, supply, equilibrium, and cross-price elasticity.

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