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NEW QUESTION 43
Price increases from 10 to 12 dollars and the price elasticity of demand is -0.5. The quantity demanded was 500 units. What will it be now?

• A. 500.
• B. 450.
• C. 550.

Answer: B

Explanation:
This means that any given percentage fall in price leads to an increase in quantity demanded that is half as much; a 20% price increase will reduce the quantity demanded by 10%. This means the quantity demanded will be 450 units.

NEW QUESTION 44
Real gross domestic product is best defined as:

• A. the market value of all final goods and services produced in an economy stated in the prices of a given year.
• B. all goods and services produced in an economy stated in the prices of a given year.
• C. the market value of goods and services produced in an economy stated in current-year prices.

Answer: A

Explanation:
That's the definition of real GDP.

NEW QUESTION 45
Average income increases from $20,000 p.a. to $22,000 p.a. Quantity demanded per year increases from 5000 to 6000 units. Which of the following is correct?

• A. Income elasticity is -2.
• B. The product is normal.
• C. Demand is price inelastic.

Answer: B

Explanation:
The percentage change in demand is +20%; the percentage change in income is +10%. This means the product is normal because demand rises with more income and has an income elasticity of +2.

NEW QUESTION 46
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