Week 1 Knowledge Check

Knowledge Check Week 1The material presented below is not meant to be a comprehensive list of all you need to know in the content area. Rather it is a starting point for building your knowledge and skills. Additional study materials are recommended in each area below to help you master the material. Personalized Study Guide Results: Score: 12 / 12 Concepts Mastery Questions Pricing Decisions 100% Market Systems 100% Market Equilibrium 100% Concept: Pricing Decisions Mastery 100% Questions 1 . Revenue increases when †¢ A. roducer surplus increases Correct : Producer surplus is the difference between the minimum price the producer is willing to receive and what they actually receive. The surplus is their profit, and the larger the surplus, the greater their profit on the good. When it decreases, the producer receives a price closer to the minimum acceptable. The consumer surplus measures what the consumer is willing to pay and that price’s difference from the market price. The closer to the market price, the higher the consumer surplus, as consumers are spending ess than they are willing to, and the less spent, the lower the revenue will be for the good. Materials †¢ Producer Surplus 2 . An increase in the price of an inelastic goods †¢ C. increases revenues Correct : Inelastic goods are necessities that consumers continue to purchase even when the price increases. This increases the revenue, as more is paid for each good. The percentage change in price increases faster than the change in quantity, which may remain constant. When more is paid for a good or a service, revenue increases. Materials †¢ Price Elasticity and the Total-Revenue Curve Inelastic Demand 3 . Price elasticity of Demand increases whe †¢ C. people become more price sensitive over time Correct : Price elasticity of demand measures the percentage change in quantity demanded divided by the percentage change in price. Price elasticity is either inelastic or elastic. As the price elasticity of demand coefficient rises, price elasticity becomes more elastic. A low price elasticity coefficient relates to an item that has very few substitutes, which causes people to be less sensitive to a change in price, such as in gasoline or medicine (inelastic demand, Ed