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Your younger sister needs $50 to buy a new bike. She has opened a lemonade stand to make the money she needs. Your mother is paying for all of the ingredients. She currently is charging 25 cents per cup, but she wants to adjust her price to earn the $50 faster. If you know that the demand for lemonade is elastic, what is your advice to her?

• Leave the price at 25 cents and be patient.

• Raise the price to increase total revenue.

• Lower the price to increase total revenue.

• There isn't enough information given to answer this question.

Suppose the point (Q = 3,400, P = $20) is the midpoint on a certain downward-sloping, linear demand curve. Then:

• A decrease in price from $18 to $16 will increase total revenue.

• A decrease in price from $24 to $22 will decrease total revenue.

• A decrease in price from $21 to $19 will decrease total revenue.

• The maximum value of total revenue is $68,000.

Suppose a market has the demand function Qd = 20 - 0.5P. At which of the following prices will total revenue be maximized?

• $10

• $20

• $30

• $40

Suppose a market has the demand function Qd = 20 - 0.5P. Between which of the following price ranges is demand most inelastic?

• $0 to $10

• $10 to $20

• $20 to $30

• $30 to $40

Income elasticity of demand measures how:

• the quantity demanded changes as consumer income changes.

• consumer purchasing power is affected by a change in the price of a good.

• the price of a good is affected when there is a change in consumer income.

• many units of a good a consumer can buy given a certain income level.

To determine whether a good is considered normal or inferior, one could examine the value of the:

• income elasticity of demand for that good.

• price elasticity of demand for that good.

• price elasticity of supply for that good.

• cross-price elasticity of demand for that good.

Suppose good X has a positive income elasticity of demand. This implies that good X could be:

• (i) only

• (i) and (ii) only

• (i), (ii), and (iv) only

• (iii) only

Suppose good X has a negative income elasticity of demand. This implies that good X is:

• a normal good.

• a necessity.

• an inferior good.

• a luxury.

If an increase in income results in a decrease in the quantity demanded of a good, then for that good, the:

• cross-price elasticity of demand is negative.

• price elasticity of demand is elastic.

• income elasticity of demand is negative.

• income elasticity of demand is positive.

Which of the following should be held constant when calculating an income elasticity of demand?

• the quantity of the good demanded

• the price of the good

• income

• All of the above should be held constant.