Table 4.1 -Refer to Table 4.1.Suppose You Own a Bookstore.You Believe That

question 107

Multiple Choice

Table 4.1
-Refer to Table 4.1.Suppose you own a bookstore.You believe that you can sell 40 copies per day of the latest John Grisham novel when the price is $35.You consider lowering the price to $25 and believe this will increase the quantity sold to 50 books per day.Compute the price elasticity of demand using the mid-point formula and these data.Select the correct implication from your work.

• A)The demand for the John Grisham book is inelastic.Revenue will fall if the price is lowered.
• B)The demand for the John Grisham book is elastic.Revenue will rise if the price is lowered.
• C)The demand for the John Grisham book is inelastic.Revenue will rise if the price is lowered.
• D)The demand for the John Grisham book is elastic.Revenue will fall if the price is lowered.

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Definitions:

Demand Curve

A chart that displays the connection between a product's price and the amount consumers want to buy.

Nonprice Competition

A marketing strategy wherein companies focus on product or service differentiation rather than on changing prices.

Pure Competition

A market structure characterized by an extensive number of small sellers, selling identical products, with no single seller able to influence market prices.

Price Takers

Market participants who accept the prevailing market price as they cannot influence it due to their small market share.