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Practice Quiz 2 LATEST
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Which of the following is NOT a factor that directly impacts a consumer’s WTP for a good? Availability of substitute goods WTP and the shape of the demand curve are influenced by the availability... of acceptable substitutes for a good. Income of the consumer A consumer with higher income is typically willing to pay more for a good. Prices of the inputs used to produce the good correct The prices of inputs used to produce the good do not affect WTP – and therefore demand – directly. Age of the consumer The age of the buyer can definitely influence his or her WTP for a good. For example, an older individual would likely be willing to pay more for life insurance than a younger person 2) A product has a price elasticity of 1.4. This means that: Total revenue falls when the price increases. correct The price elasticity is greater than 1, which shows that the percentage change in quantity demanded will be greater than the percentage change in price. Revenue is unaffected by price changes. Revenue is only unaffected by price changes if the price elasticity of demand is 1. Total revenue increases when the price increases. Revenue would increase in response to an increase in price only if demand for the product were price inelastic. Net profit falls when the price rises. [Show More]
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