Suppose that friend A suggests the price increase to increase the total revenue and on the other hand, friend B suggests decreasing the price in order to increase the total revenue. Determine if the suggestions given by friend A and friend are correct or not. Y O Price P₁ D Q Q₁ Quantity Demanded a. Both friend A and friend B are correct. b. Both friend A and friend B are incorrect. c. Friend A is correct, and Friend B is incorrect. d. Friend A is incorrect, and Friend B is correct.

Suppose that friend A suggests the price increase to increase the total revenue and on the other hand, friend B suggests decreasing the price in order to increase the total revenue. Determine if the suggestions given by friend A and friend are correct or not. Y O Price P₁ D Q Q₁ Quantity Demanded a. Both friend A and friend B are correct. b. Both friend A and friend B are incorrect. c. Friend A is correct, and Friend B is incorrect. d. Friend A is incorrect, and Friend B is correct.

Principles of Microeconomics

7th Edition

ISBN:9781305156050

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter5: Elastic And Its Application

Section: Chapter Questions

Problem 7PA: Maria has decided always to spend one third of her income on clothing. a. What is her income...

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Maria has decided always to spend one third of her income on clothing. a. What is her income elasticity of clothing demand? b. What is her price elasticity of clothing demand? c. It Marias tastes change and she decides to spend only one fourth of her income on clothing, how does her demand curve change? What is her income elasticity and price elasticity now?
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The shorter the period of time consumers have to adjust to price changes, the O lower; income O lower price O higher; income higher; price the elasticity of demand.
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