2012 Multiple Choice (Elasticity)
Answer - (C) The demand for peanuts must be price inelastic
Understand - If a portion of the peanut crop is destroyed then the price of peanuts will rise. If even with the rise of the price for peanuts, total revenue increases then the demand for peanuts must have been in the inelastic section of the demand curve.
from the Elasticity Cheat Sheet here.
Answer - (D) relatively inelastic (demand for labor)
This one tricked me.....
Understand - (((What they are saying!!))
The change in the price of labor is larger than the change in the quantity fired.
Answer - (C) Unit elastic
P x Q = TR (total revenue)
$8 x 400 = $3200(TR)
or
$4 x 800 = $3200(TR)
Therefore - Unit Elastic
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