The owner of a local bakery shop observes that when he increases the price of Italian bread, his total revenue decreases, and when he lowers the price of Italian bread, his total revenue increases. This suggests that: Italian bread buyers act irrationally. the demand for Italian bread is elastic with respect to price. there are few good substitutes for Italian bread. the demand for Italian bread is inelastic with respect to price.

The owner of a local bakery shop observes that when he increases the price of Italian bread, his total revenue decreases, and when he lowers the price of Italian bread, his total revenue increases. This suggests that: Italian bread buyers act irrationally. the demand for Italian bread is elastic with respect to price. there are few good substitutes for Italian bread. the demand for Italian bread is inelastic with respect to price.

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter6: Elasticities

Section: Chapter Questions

Problem 11P

See similar textbooks

Similar questions

The equation for a demand curve is P=483Q. What is the elasticity in moving from quantity of 5 to a quantity of 6?
Income Effects depend on the income elasticity of demand for each good limit you buy. If one of the goods you buy has a negative income elasticity, that is, it is an inferior good, what must be true of the income elasticity of the other good you buy?
Economists define normal goods as having a positive income elasticity. We can divide normal goods into two types: Those whose income elasticity is less than one and those whose income elasticity is greater than one. Think about products that would fall into each category. Can you come up with a name for each category?
What is the formula for the income elasticity of demand?
Isabella always spends $50 on red roses each month and simply adjusts the quantity she purchases as the price changes. What can you say about Isabella's elasticity of demand for roses?
The avenge annual income rises from 25,000 to 33,000, and the quantity of bleed consumed in a year by the avenge person falls from 30 loaves to 22 loaves. What is the income elasticity of bread consumption? Is bread a normal or an inferior good?
What is the difference between the demand and the quantity demanded of a product, say milk? Explain in words and show the difference on a graph with a demand curve for milk.
The president of Tucker Motors says, Lowering the price wont sell a single additional Tucker car. The president believes that the price elasticity of demand is a. perfectly elastic. b. perfectly inelastic. c. unitary elastic. d. elastic.
The Stopdecay Company sells an electric toothbrush for $25. Its sales have averaged 8,000 units per month over the past year. Recently, its closest competitor, Decayfigh ter, reduced the price of its electric toothbrush from $35 to $30. As a result, Stopde cays sales declined by 1,500 units per month. What is the arc cross elasticity of demand between Stopdecays toothbrush and Decayfighters toothbrush? What does this indicate about the relationship between the two products? If Stopdecay knows that the arc price elasticity of demand for its toothbrush is 1.5, what price would Stopdecay have to charge to sell the same number of units as it did before the Decayfighter price cut? Assume that Decayfighter holds the price of its toothbrush constant at $30. What is Stopdecays average monthly total revenue from the sale of electric toothbrushes before and after the price change determined in part (b)? Is the result in part (c) necessarily desirable? What other factors would have to be taken into consideration?
A life-saving medicine without any close substitutes will tend to have a. a small elasticity of demand. b. a large elasticity of demand. c. a small elasticity of supply. d. a large elasticity of supply.