The owner of a pizza shop observes that when she raises the price of a large pizza, her total revenue decreases, and when she lowers the price of a large pizza, her total revenue increases. This suggests that:
A. pizza lovers act irrationally.
B. the demand for her large pizzas is inelastic with respect to price.
C. the demand for her large pizzas is elastic with respect to price.
D. there are few good substitutes for a large pizza.
Answer: C
You might also like to view...
If aggregate expenditure is more than GDP, then inventories fall and GDP rises
Indicate whether the statement is true or false
In the spring of 2002, the Japanese Ministry of Finance intervened in the foreign exchange market by selling yen and purchasing dollars. Why? And why did the intervention fail?
What will be an ideal response?
Some firms in monopolistically competitive markets differentiate their products by their physical characteristics.
Answer the following statement true (T) or false (F)
What is one way to adjust the CPI for substitution bias?
A) Use the Paasche index. B) Use the Laspeyres index. C) Multiply the Paasche Index and the Laspeyres index. D) Take the geometric mean of the Paasche index and the Laspeyres index.