Demand for personal computers (PCs) can be characterized as point elasticity as follows: Price elasticity = -5, cross-price elasticity with software = -4, and income elasticity = 2.5. Whether the statements written in points a, b, c, and d below are true or false, and are accompanied by a description / explanation / calculation that supports your opinion. A. Decreasing PC prices will increase the demand for PCs and will also increase total revenue. B. The value of cross-price elasticity above indicates that a 5% decrease in PC price will lead to a 20% increase in software demand. C. Demand for PC is price elastic and PC is normal good. D. A decrease in software prices will increase the income received by PC sellers and software sellers.
Demand for personal computers (PCs) can be characterized as point elasticity as follows: Price elasticity = -5, cross-price elasticity with software = -4, and income elasticity = 2.5. Whether the statements written in points a, b, c, and d below are true or false, and are accompanied by a description / explanation / calculation that supports your opinion. A. Decreasing PC prices will increase the demand for PCs and will also increase total revenue. B. The value of cross-price elasticity above indicates that a 5% decrease in PC price will lead to a 20% increase in software demand. C. Demand for PC is price elastic and PC is normal good. D. A decrease in software prices will increase the income received by PC sellers and software sellers.
Microeconomics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506893
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter7: Consumer Choice And Elasticity
Section: Chapter Questions
Problem 9CQ
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Whether the statements written in points a, b, c, and d below are true or false, and are accompanied by a description / explanation / calculation that supports your opinion.
A. Decreasing PC prices will increase the demand for PCs and will also increase total revenue.
B. The value of cross-price elasticity above indicates that a 5% decrease in PC price will lead to a 20% increase in software demand.
C. Demand for PC is price elastic and PC is normal good.
D. A decrease in software prices will increase the income received by PC sellers and software sellers.
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