Exam 2: Demand Theory

About 90% of the total world revenue accounted for by electronic commerce in 1999 involved business-to-business transactions.

The cross-price elasticity of demand measures the percentage change in the demand for one good that results from a one percent change in the quantity demanded of a second good.

A firm has kept track of the quantity demanded of its output (Good X) during four time periods. The price of X and the prices of two other goods (Good Y and Good Z) were also recorded for each time period. The information is provided in the table that follows. Use it to calculate the own-price arc elasticity of demand and the two cross-price elasticities of demand. Determine whether Good Y and Good Z are complements or substitutes for Good X.

If consumers expect the price of a commodity to increase in the future, then demand for the commodity will decrease.

Estimates of demand elasticities are used by firms to determine optimal operational policies.

Improved telecommunication technology has contributed to the globalization of markets.