Suppose that the own-price elasticity for Ragu spaghetti sauce is -1.25. Which of the following is (are) true?
A) The demand for Ragu spaghetti sauce is unitary elastic.
B) A 10% decrease in price leads to an 8% increase in quantity demanded.
C) A 4% increase in price leads to a 5% decrease in quantity demanded.
D) None of the above.
Answer: C
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A firm in a monopolistically competitive market faces a
a. downward-sloping demand curve because the firm's product is different from those offered by other firms. b. downward-sloping demand curve because there are only a few firms in the market. c. horizontal demand curve because there are many firms in the market. d. horizontal demand curve because firms can enter the market without restriction.
Assuming price elasticity of demand is reported as an absolute value, a price elasticity of demand of 1.2 indicates an:
A. inelastic demand, meaning the percentage change in quantity demanded will be less than the percentage change in price. B. elastic demand, meaning the percentage change in quantity demanded will be less than the percentage change in price. C. inelastic demand, meaning the percentage change in quantity demanded will be greater than the percentage change in price. D. elastic demand, meaning the percentage change in quantity demanded will be greater than the percentage change in price.