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Exam 2: Demand Theory

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Question 21

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Estimates of demand elasticities are used by firms to determine optimal operational policies.

A) True
B) False

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Question 22

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The cross-price elasticity of demand measures the percentage change in the demand for one good that results from a one percent change in the quantity demanded of a second good.

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B) False

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Question 23

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A firm has kept track of the quantity demanded of its output (Good X) during four time periods. The price of X and the prices of two other goods (Good Y and Good Z) were also recorded for each time period. The information is provided in the table that follows. Use it to calculate the own-price arc elasticity of demand and the two cross-price elasticities of demand. Determine whether Good Y and Good Z are complements or substitutes for Good X.

If consumers expect the price of a commodity to increase in the future, then demand for the commodity will decrease.

About 90% of the total world revenue accounted for by electronic commerce in 1999 involved business-to-business transactions.

Improved telecommunication technology has contributed to the globalization of markets.