Elasticity

question 33

Short Answer

Elasticity. The demand for mini cassette players can be characterized by the following point elasticities: price elasticity = -2, cross-price elasticity with AA Alkaline batteries = -1.5, and income elasticity = 3. Indicate whether each of the following statements is true or false, and explain your answer.
A. A price increase for cassette players will decrease both the number of units demanded and the total revenue of sellers.
B. The cross-price elasticity indicates that a 2% reduction in the price of cassette players will cause a 3% increase in battery demand.
C. Demand for cassette players is price elastic and they are cyclical normal goods.
D. Falling battery prices will definitely increase revenues received by sellers of both cassette players and batteries.
E. A 3% price reduction in cassette players would be necessary to overcome the effects of a 2% decline in income.

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Definitions:

Primary Reinforcer

A stimulus that satisfies a biological need, inherently reinforcing without prior learning.

Antecedent

An event, condition, or stimulus that precedes a behavior or response, often influencing or triggering it.

Extinction

In psychology, extinction is the process by which a conditioned response decreases or disappears after repeated presentations without the unconditioned stimulus.

Positive Reinforcer

A stimulus that increases the probability of a behavior being repeated by providing a rewarding outcome.