Microeconomics License Exam Questions And Answers Already Passed 2024.

Determinants of Price Elasticity of Demand - Answer Availability of substitutes, Luxury or Necessity, The share of total budget, time dimension Availability of substitutes - Answer greater the number of substitutes, the more ELASTIC the demand, when all firms in a market produce products which are perfect substitutes for each other, the demand is perfectly elastic Luxury or Necessity - Answer A product is a luxury will have more elastic demand than a product deemed necessity. Luxury is a product that consumers can easily do without compared to necessity The share of the total budget - Answer the larger the proportion of a budget the good constitutes, the more elastic the demand Time dimension - Answer the more time the consumer is given to adjust to the price change, the more elastic the demand Total Revenue= - Answer =Price*Quantity=P*Q The price of a good being sold multiplied by the number of units sold Relationship between price elasticity and total revenue - Answer both calculations use price and quantity, they are directly proportional. All varies on price. Total Revenue decreases... - Answer -Elastic (Ed>1) and Price increases -Inelastic (Ed<1) and Price decreases Total Revenue increases... - Answer -Elastic (Ed>1) and Price decreases -Inelastic (Ed<1) and Price increases