Question 1

You just started selling hot sauce prepared with a very special recipe that you got from your Peruvian cousin. Your business is doing great and people love your product. You are still adjusting the price of your hot sauce. Last week you lowered your price and you saw that your revenue went up. This implies that:

Group of answer choices

The price elasticity of the demand is less than 1.

The income elasticity of the demand is between 0 and 1.

The income elasticity of the demand is larger than 1.

The price elasticity of the demand is more than 1.

The income elasticity of the demand is negative.

Question 2

Hot Dogs and Philly Cheesesteaks are substitutes. Which of the following sentences isincorrect?

Group of answer choices

When the price of hot dogs increases, the change in demand for cheesesteaks larger when the cross-price elasticity of cheesesteaks and hotdogs is larger.

When the price of hot dogs increases, demand for cheesesteaks increases.

The cross-price elasticity of the two goods is positive.

When the price of cheesesteaks increases, demand for hot dogs decreases.

Question 3

What is true of the efficient allocation?

Group of answer choices

None of the above

Consumer + Producer surplus is maximized

Producer surplus is maximized

Consumer surplus is maximized