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With elastic demand, the percentage increase in quantity demanded exceeds the percentage decrease in price, so the quantity effect dominates and total revenue rises."},{"text":"A price cut raises total revenue when demand is inelastic (|PED| < 1).","correct":false,"explanation":"This reverses the elasticity relationship: inelastic demand makes quantity increase proportionately less than price falls. The correct condition is elastic demand, where the larger quantity response increases total revenue."},{"text":"A price cut raises total revenue when demand is unit elastic (|PED| = 1).","correct":false,"explanation":"Unit elasticity means the percentage change in quantity exactly offsets the percentage change in price, leaving total revenue unchanged. Revenue rises after a price cut only when demand is elastic."},{"text":"A price cut raises total revenue when demand is perfectly inelastic (|PED| = 0).","correct":false,"explanation":"Perfectly inelastic demand produces no quantity response, so a lower price directly reduces revenue. The correct condition is elastic demand, where quantity increases proportionately more than price falls."}]},{"id":"dd9861d3-8b49-462f-8765-b394a81ec734","cardType":"basic","points":1,"front":"When does a price cut lower total revenue?","back":"A price cut lowers total revenue when demand is inelastic (|PED| < 1).","mcqOptions":[{"text":"A price cut lowers total revenue when demand is inelastic (|PED| < 1).","correct":true,"explanation":"With inelastic demand, quantity demanded increases proportionately less than price decreases. The fall in price therefore outweighs the quantity effect, causing total revenue to decline."},{"text":"A price cut lowers total revenue when demand is elastic (|PED| > 1).","correct":false,"explanation":"Elastic demand makes quantity increase proportionately more than price falls, so total revenue rises rather than falls. A price cut lowers revenue when demand is inelastic."},{"text":"A price cut lowers total revenue when demand is unit elastic (|PED| = 1).","correct":false,"explanation":"At unit elasticity, the percentage changes in price and quantity exactly offset each other, leaving revenue unchanged. A fall in total revenue requires inelastic demand."},{"text":"A price cut lowers total revenue when demand is perfectly elastic (|PED| = ∞).","correct":false,"explanation":"Perfectly elastic demand involves an extreme quantity response, so a successful price cut would increase revenue rather than reduce it. The correct condition is inelastic demand."}]},{"id":"98f559a7-4c7d-4795-984a-35411f41c311","cardType":"basic","points":2,"front":"Why can a price rise raise total revenue when demand is inelastic?","back":"A price rise raises total revenue when demand is inelastic, because quantity falls proportionately less than price rises.","mcqOptions":[{"text":"A price rise raises total revenue when demand is inelastic, because quantity falls proportionately less than price rises.","correct":true,"explanation":"Inelastic demand means the percentage fall in quantity is smaller than the percentage rise in price. The price effect therefore dominates, increasing total revenue."},{"text":"A price rise raises total revenue when demand is elastic, because quantity falls proportionately more than price rises.","correct":false,"explanation":"Elastic demand causes the quantity reduction to outweigh the higher price, reducing revenue. The correct condition is inelastic demand, where quantity falls proportionately less than price rises."},{"text":"A price rise raises total revenue when demand is unit elastic, because quantity falls by the same proportion as price rises.","correct":false,"explanation":"Unit elasticity makes the proportional price increase exactly cancel the proportional quantity decrease, so revenue stays constant. Revenue rises after a price rise when demand is inelastic."},{"text":"A price rise raises total revenue when demand is inelastic, because quantity falls proportionately more than price rises.","correct":false,"explanation":"Although inelastic demand is the relevant condition, the stated proportional relationship is reversed. Quantity must fall less than price rises for total revenue to increase."}]},{"id":"a8522b6f-ff7a-4317-a124-75159980c813","cardType":"basic","points":2,"front":"Why can a price cut raise total revenue when demand is elastic?","back":"A price cut raises total revenue when demand is elastic, because quantity rises proportionately more than price falls.","mcqOptions":[{"text":"A price cut raises total revenue when demand is elastic, because quantity rises proportionately more than price falls.","correct":true,"explanation":"Elastic demand means the percentage increase in quantity exceeds the percentage reduction in price. The quantity effect therefore outweighs the price effect, increasing total revenue."},{"text":"A price cut raises total revenue when demand is inelastic, because quantity rises proportionately less than price falls.","correct":false,"explanation":"This describes the inelastic response, where the price reduction dominates and revenue falls. The correct condition is elastic demand, with quantity rising proportionately more than price falls."},{"text":"A price cut raises total revenue when demand is unit elastic, because quantity rises by the same proportion as price falls.","correct":false,"explanation":"With unit elasticity, the proportional quantity increase exactly offsets the proportional price reduction, so revenue remains unchanged. Revenue rises only when demand is elastic."},{"text":"A price cut raises total revenue when demand is elastic, because quantity rises proportionately less than price falls.","correct":false,"explanation":"Elasticity is correctly identified, but the proportional relationship is backwards. Quantity must rise more than price falls for the increase in sales to outweigh the lower price."}]},{"id":"78762872-841b-4ce0-90b4-d845db35245f","cardType":"basic","points":1,"front":"Where is total revenue maximised on a normal demand curve?","back":"Total revenue is maximised where |PED| = 1.","mcqOptions":[{"text":"Total revenue is maximised where |PED| = 1.","correct":true,"explanation":"Revenue is maximised at unit elasticity because the percentage changes in price and quantity exactly offset each other there. This is also where marginal revenue equals zero."},{"text":"Total revenue is maximised where |PED| > 1.","correct":false,"explanation":"The elastic section has positive marginal revenue, so moving along it toward the midpoint still increases revenue. Maximum revenue occurs at unit elasticity, where marginal revenue becomes zero."},{"text":"Total revenue is maximised where |PED| < 1.","correct":false,"explanation":"The inelastic section has negative marginal revenue, so moving further into it reduces revenue. The maximum is reached at the boundary between elastic and inelastic demand, where elasticity equals one."},{"text":"Total revenue is maximised where |PED| = 0.","correct":false,"explanation":"Zero elasticity means quantity does not respond to price, so this is not the revenue maximum on a normal demand curve. The maximum occurs where absolute elasticity equals one."}]},{"id":"92ed3b40-ce70-4a5e-aec8-53a50e328905","cardType":"basic","points":1,"front":"What is the sign of marginal revenue on the elastic section of demand?","back":"Marginal revenue is positive on the elastic section of the demand curve.","mcqOptions":[{"text":"Marginal revenue is positive on the elastic section of the demand curve.","correct":true,"explanation":"On the elastic section, reducing price increases quantity proportionately more, so total revenue rises. The resulting additional revenue is positive, meaning marginal revenue is positive."},{"text":"Marginal revenue is negative on the elastic section of the demand curve.","correct":false,"explanation":"Negative marginal revenue occurs on the inelastic section, where a price reduction lowers total revenue. The elastic section has positive marginal revenue because quantity responds proportionately more."},{"text":"Marginal revenue is zero on the elastic section of the demand curve.","correct":false,"explanation":"Marginal revenue is zero at unit elasticity, the point where total revenue is maximised. On the elastic section, total revenue is still rising, so marginal revenue is positive."},{"text":"Marginal revenue is constant on the elastic section of the demand curve.","correct":false,"explanation":"The sign of marginal revenue is positive on the elastic section, not constant. Marginal revenue varies along a normal demand curve and reaches zero at unit elasticity."}]},{"id":"3c1c295e-24ce-4d4c-9ec6-1c682b1d1c4b","cardType":"basic","points":1,"front":"What is the sign of marginal revenue on the inelastic section of demand?","back":"Marginal revenue is negative on the inelastic section of the demand curve.","mcqOptions":[{"text":"Marginal revenue is negative on the inelastic section of the demand curve.","correct":true,"explanation":"On the inelastic section, reducing price increases quantity proportionately less, so total revenue falls. The extra quantity sold therefore contributes negative marginal revenue."},{"text":"Marginal revenue is positive on the inelastic section of the demand curve.","correct":false,"explanation":"Positive marginal revenue belongs to the elastic section, where quantity responds proportionately more than price. In the inelastic section, a price reduction lowers total revenue and marginal revenue is negative."},{"text":"Marginal revenue is zero on the inelastic section of the demand curve.","correct":false,"explanation":"Zero marginal revenue occurs exactly at unit elasticity, where total revenue is maximised. Beyond that point, in the inelastic section, marginal revenue becomes negative."},{"text":"Marginal revenue is constant on the inelastic section of the demand curve.","correct":false,"explanation":"The relevant feature is a negative sign, not constancy. Marginal revenue changes along a normal demand curve and is negative wherever demand is inelastic."}]},{"id":"dddc85fe-f3d2-475a-9e5c-4691975903dc","cardType":"basic","points":1,"front":"Which part of a straight-line demand curve is elastic?","back":"On a straight-line demand curve, the upper part is elastic and the lower part is inelastic.","mcqOptions":[{"text":"On a straight-line demand curve, the upper part is elastic and the lower part is inelastic.","correct":true,"explanation":"Elasticity varies along a straight-line demand curve: the upper part has a large quantity response relative to price, while the lower part has a smaller proportional response."},{"text":"On a straight-line demand curve, the upper part is inelastic and the lower part is elastic.","correct":false,"explanation":"This reverses the elasticity pattern on a straight-line demand curve. The upper section is elastic because quantity responds proportionately more, while the lower section is inelastic."},{"text":"On a straight-line demand curve, the upper part is unit elastic and the lower part is inelastic.","correct":false,"explanation":"Unit elasticity occurs only at the midpoint of a straight-line demand curve, not throughout its upper part. The upper part is elastic and the lower part is inelastic."},{"text":"On a straight-line demand curve, the upper part is elastic and the lower part is elastic.","correct":false,"explanation":"Only the upper section is elastic. Below the midpoint, quantity responds proportionately less to price changes, so the lower part is inelastic."}]},{"id":"7ace9189-cd88-43f3-94a5-e6a6dc7811bd","cardType":"basic","points":1,"front":"What happens to marginal revenue at the midpoint of a straight-line demand curve?","back":"At the midpoint, PED = 1 and marginal revenue equals zero.","mcqOptions":[{"text":"At the midpoint, PED = 1 and marginal revenue equals zero.","correct":true,"explanation":"At unitary price elasticity, the percentage change in quantity exactly offsets the percentage change in price, so total revenue is maximised and marginal revenue is zero."},{"text":"At the midpoint, PED = 0 and marginal revenue is positive.","correct":false,"explanation":"Zero elasticity means quantity demanded does not respond to price, which is not the midpoint condition. At the midpoint, PED equals one and marginal revenue equals zero."},{"text":"At the midpoint, PED > 1 and marginal revenue is negative.","correct":false,"explanation":"Elastic demand occurs above the midpoint, where lowering price increases total revenue. At the midpoint, PED equals one and marginal revenue is zero."},{"text":"At the midpoint, PED < 1 and marginal revenue is positive.","correct":false,"explanation":"Inelastic demand occurs below the midpoint, where raising price increases total revenue. At the midpoint, PED equals one and marginal revenue is zero."}]},{"id":"ac6b773b-e461-4825-8f70-417e7f353f90","cardType":"basic","points":2,"front":"A firm cuts price from £10 to £8 while quantity rises from 100 to 150. What happens to total revenue?","back":"The price cut raises revenue from £1,000 to £1,200.","mcqOptions":[{"text":"The price cut raises revenue from £1,000 to £1,200.","correct":true,"explanation":"Initial revenue is £10 × 100 = £1,000, while new revenue is £8 × 150 = £1,200. The quantity increase more than offsets the lower price."},{"text":"The price cut lowers revenue from £1,000 to £800.","correct":false,"explanation":"This multiplies the new price by the original quantity instead of the new quantity. The correct calculation is £8 × 150 = £1,200, so revenue rises."},{"text":"The price cut raises revenue from £1,000 to £1,500.","correct":false,"explanation":"This incorrectly keeps the original price of £10 when calculating new revenue. Using the new figures gives £8 × 150 = £1,200, so revenue rises to £1,200."},{"text":"The price cut raises revenue from £1,000 to £1,100.","correct":false,"explanation":"This understates the revenue increase, often caused by adding the quantity change to the original revenue. Revenue must be calculated by multiplying £8 by 150, giving £1,200."}]},{"id":"8cfefb52-c285-4d7d-b803-95628273f46a","cardType":"basic","points":2,"front":"A firm raises price from £10 to £12 while quantity falls from 100 to 90. What happens to total revenue?","back":"The price rise raises revenue from £1,000 to £1,080.","mcqOptions":[{"text":"The price rise raises revenue from £1,000 to £1,080.","correct":true,"explanation":"Initial revenue is £10 × 100 = £1,000, while new revenue is £12 × 90 = £1,080. The price increase outweighs the fall in quantity demanded."},{"text":"The price rise lowers revenue from £1,000 to £900.","correct":false,"explanation":"This multiplies the original price by the new quantity and ignores the higher price. The correct new revenue is £12 × 90 = £1,080, so revenue increases."},{"text":"The price rise raises revenue from £1,000 to £1,200.","correct":false,"explanation":"This uses the new price with the original quantity, calculating £12 × 100 rather than actual revenue. With quantity at 90, revenue is £12 × 90 = £1,080."},{"text":"The price rise lowers revenue from £1,000 to £980.","correct":false,"explanation":"This treats the quantity fall as if it directly reduced revenue pound-for-pound. Revenue depends on price multiplied by quantity, giving £12 × 90 = £1,080."}]},{"id":"6fbdcd37-e105-4f91-9b76-3ec4b61709f4","cardType":"basic","points":2,"front":"What asymmetric rival reaction creates the kinked demand curve?","back":"The kinked demand model assumes rivals ignore price rises but match price cuts.","mcqOptions":[{"text":"The kinked demand model assumes rivals ignore price rises but match price cuts.","correct":true,"explanation":"Rivals are assumed not to follow a price increase, causing customers to switch away, but to match a price cut, limiting the customers gained."},{"text":"The kinked demand model assumes rivals match price rises but ignore price cuts.","correct":false,"explanation":"This reverses the asymmetric reaction. The model assumes rivals ignore price rises, encouraging switching, but match price cuts, preventing substantial market-share gains."},{"text":"The kinked demand model assumes rivals match both price rises and price cuts.","correct":false,"explanation":"Matching both changes would not create the model’s asymmetric kink. Rivals are assumed to ignore price rises but match price cuts."},{"text":"The kinked demand model assumes rivals ignore both price rises and price cuts.","correct":false,"explanation":"Ignoring both changes removes the strategic asymmetry behind the kink. The model specifically assumes rivals ignore rises but match cuts."}]},{"id":"6ab53895-a5bd-4e3e-9cb5-aaafcd5685df","cardType":"basic","points":2,"front":"Why is demand elastic above the current price in the kinked demand model?","back":"Demand is elastic above the kink because rivals keep their prices unchanged, allowing them to capture customers switching away.","mcqOptions":[{"text":"Demand is elastic above the kink because rivals keep their prices unchanged, allowing them to capture customers switching away.","correct":true,"explanation":"When the firm raises price, unchanged rival prices make substitutes relatively cheaper, so many customers switch away and quantity demanded changes proportionately more than price."},{"text":"Demand is elastic above the kink because rivals keep their prices unchanged, allowing the firm to capture customers from competitors.","correct":false,"explanation":"A price rise makes the firm less attractive, so customers switch to rivals rather than to the firm. The resulting large quantity loss makes demand elastic."},{"text":"Demand is elastic above the kink because rivals raise their prices too, allowing the firm to retain most existing customers.","correct":false,"explanation":"The model assumes rivals keep prices unchanged after a rise, not raise them as well. Their relatively cheaper prices cause substantial switching away."},{"text":"Demand is elastic above the kink because rivals cut their prices, allowing them to increase their market share immediately.","correct":false,"explanation":"Rivals are assumed to leave prices unchanged after a rise. Their unchanged prices still attract switching customers, producing elastic demand above the kink."}]},{"id":"57d9e092-1168-49e1-add8-129d1f0e9b53","cardType":"basic","points":2,"front":"Why is demand inelastic below the current price in the kinked demand model?","back":"Demand is inelastic below the kink because rivals match the cut, so the firm gains only a few extra customers.","mcqOptions":[{"text":"Demand is inelastic below the kink because rivals match the cut, so the firm gains only a few extra customers.","correct":true,"explanation":"Matching cuts mean rivals remain similarly priced, so the firm attracts only a small additional quantity. Quantity therefore changes proportionately less than price."},{"text":"Demand is inelastic below the kink because rivals ignore the cut, so the firm gains many extra customers.","correct":false,"explanation":"If rivals ignored a cut, the firm would become substantially cheaper and attract many customers, making demand more elastic. The model assumes rivals match cuts."},{"text":"Demand is inelastic below the kink because rivals match the cut, so the firm loses most of its existing customers.","correct":false,"explanation":"Matching the cut prevents a major competitive disadvantage, so the firm does not lose most customers. It gains a small number, producing inelastic demand."},{"text":"Demand is inelastic below the kink because rivals raise their prices, so the firm gains all of the switching customers.","correct":false,"explanation":"The model requires rivals to match the price cut, keeping prices aligned. Raising rival prices would create a much larger quantity response, not inelastic demand."}]},{"id":"ddffd337-4343-41a3-9ac3-803b69362437","cardType":"basic","points":3,"front":"Why does the kinked demand model predict price rigidity?","back":"A price rise above the kink loses much revenue, while a price cut below it gains little revenue; therefore revenue is greatest by holding price at the kink.","mcqOptions":[{"text":"A price rise above the kink loses much revenue, while a price cut below it gains little revenue; therefore revenue is greatest by holding price at the kink.","correct":true,"explanation":"The asymmetric rival response makes customers highly responsive to increases and only weakly responsive to cuts, so changing price in either direction does not improve revenue."},{"text":"A price rise above the kink gains much revenue, while a price cut below it loses little revenue; therefore revenue is greatest by raising price above the kink.","correct":false,"explanation":"A price rise causes substantial customer switching because rivals do not follow it. A cut gains few customers because rivals match it, making the kink price preferable."},{"text":"A price rise above the kink loses little revenue, while a price cut below it gains much revenue; therefore revenue is greatest by cutting price below the kink.","correct":false,"explanation":"This reverses both revenue effects. Unmatched price rises lose many customers, while matched cuts attract few, so firms have little incentive to move from the kink."},{"text":"A price rise above the kink and a price cut below it both gain revenue; therefore revenue is greatest by changing price frequently.","correct":false,"explanation":"The model predicts neither direction reliably improves revenue: rises lose substantial customers and cuts gain few. This creates price rigidity around the kink."}]},{"id":"28791d37-338d-46ad-9e11-f095fcb52a5e","cardType":"basic","points":1,"front":"What feature does the marginal revenue curve have in the kinked demand model?","back":"The marginal revenue curve has a vertical discontinuous gap directly below the kink.","mcqOptions":[{"text":"The marginal revenue curve has a vertical discontinuous gap directly below the kink.","correct":true,"explanation":"The kink joins two demand segments with different slopes. Their corresponding marginal revenue segments do not meet, leaving a vertical gap directly below the kink."},{"text":"The marginal revenue curve has a horizontal continuous section directly below the kink.","correct":false,"explanation":"A horizontal section would imply constant marginal revenue, not the jump created by the kink. The two demand slopes produce a vertical discontinuous gap."},{"text":"The marginal revenue curve has a vertical continuous line directly above the kink.","correct":false,"explanation":"The relevant feature is a discontinuity below the kink, caused by the two marginal revenue segments failing to connect. It is not continuous or positioned above."},{"text":"The marginal revenue curve has a downward-sloping continuous line through the kink.","correct":false,"explanation":"A smooth continuous marginal revenue curve would not reflect the kinked demand structure. Different demand slopes create a vertical discontinuous gap below the kink."}]},{"id":"a1ab50e9-222a-4115-a72c-26fbde1df7ba","cardType":"basic","points":1,"front":"What happens to marginal revenue at the kink?","back":"At the kink, marginal revenue jumps down through the vertical gap.","mcqOptions":[{"text":"At the kink, marginal revenue jumps down through the vertical gap.","correct":true,"explanation":"The kink creates a discontinuity in the marginal revenue curve because the demand curve has different elasticities above and below the existing price."},{"text":"At the kink, marginal revenue jumps up through the vertical gap.","correct":false,"explanation":"The vertical gap is traversed downward, not upward, because marginal revenue falls when moving from the upper to the lower section at the kink. The correct conclusion is that it jumps down."},{"text":"At the kink, marginal revenue remains constant through the vertical gap.","correct":false,"explanation":"The gap represents a discontinuity, so marginal revenue does not remain constant across it. The correct conclusion is that marginal revenue jumps down through the vertical gap."},{"text":"At the kink, marginal revenue falls gradually along the demand curve.","correct":false,"explanation":"A gradual fall would not represent the discontinuity caused by the kink. The correct conclusion is that marginal revenue jumps down through the vertical gap."}]},{"id":"d9b89f3b-5663-456a-90e4-3feb1fa81460","cardType":"basic","points":3,"front":"Why is the revenue prediction of the kinked demand model conditional?","back":"The revenue conclusion depends on rivals ignoring price rises and matching price cuts; changing their reactions changes the revenue result.","mcqOptions":[{"text":"The revenue conclusion depends on rivals ignoring price rises and matching price cuts; changing their reactions changes the revenue result.","correct":true,"explanation":"The kinked demand model assumes rivals do not follow a price rise but do match a price cut. If rivals respond differently, the predicted demand and revenue effects change."},{"text":"The revenue conclusion depends on rivals matching price rises and ignoring price cuts; changing their reactions changes the revenue result.","correct":false,"explanation":"This reverses the model's behavioural assumption: rivals are expected to match cuts but ignore rises. Reversing those reactions changes the predicted result, so it is not the model's conclusion."},{"text":"The revenue conclusion depends on rivals ignoring both price rises and price cuts; changing their reactions changes the revenue result.","correct":false,"explanation":"The model does not assume rivals ignore both changes. It assumes they match price cuts while ignoring price rises, which is why the revenue prediction is conditional."},{"text":"The revenue conclusion depends on rivals matching both price rises and price cuts; changing their reactions changes the revenue result.","correct":false,"explanation":"Matching both changes would remove the asymmetric reaction that creates the kinked demand prediction. The model instead assumes rivals match cuts but ignore rises."}]},{"id":"76431b61-641c-48db-8b30-3e51ce0dfb77","cardType":"basic","points":2,"front":"What limitation does the kinked demand model have concerning the existing price?","back":"The model identifies the revenue position at the existing price but does not explain where that price came from.","mcqOptions":[{"text":"The model identifies the revenue position at the existing price but does not explain where that price came from.","correct":true,"explanation":"The kinked demand model explains why firms may retain an existing price, but it takes that price as given. It does not explain the forces that originally determined it."},{"text":"The model identifies the revenue position at the existing price but does not explain how rivals respond to price changes.","correct":false,"explanation":"Rivals' asymmetric responses are central to the model and explain the kink. The unresolved issue is why the existing price was established in the first place."},{"text":"The model identifies the revenue position at the existing price but does not explain why demand is elastic at that price.","correct":false,"explanation":"The model uses different demand elasticities above and below the kink to explain price rigidity. Its limitation is that it does not explain where the existing price came from."},{"text":"The model identifies the revenue position at the existing price but does not explain why marginal revenue has a vertical gap.","correct":false,"explanation":"The vertical marginal revenue gap follows from the two differing elasticities around the kink. The model's limitation is that it does not explain the origin of the existing price."}]},{"id":"73ccb80e-2477-4e45-b5d2-d55de8dabad2","cardType":"basic","points":2,"front":"Why can the kinked demand model not by itself identify the profit-maximising price?","back":"Because the model says nothing about costs, it cannot identify the profit-maximising price.","mcqOptions":[{"text":"Because the model says nothing about costs, it cannot identify the profit-maximising price.","correct":true,"explanation":"Profit depends on total revenue minus total cost. Since the kinked demand model describes demand and revenue but provides no cost information, it cannot determine the price that maximises profit."},{"text":"Because the model says nothing about costs, it cannot identify the revenue-maximising price.","correct":false,"explanation":"Revenue maximisation can be analysed from price and quantity information without costs. The missing cost information prevents identification of the profit-maximising price."},{"text":"Because the model says nothing about costs, it cannot identify the market-clearing price.","correct":false,"explanation":"The model's limitation concerns profit, which requires cost data, rather than market clearing. The correct conclusion is that it cannot identify the profit-maximising price."},{"text":"Because the model says nothing about costs, it cannot identify the price-elasticity-maximising price.","correct":false,"explanation":"Price elasticity is a responsiveness measure, not a profit objective requiring cost information. The missing costs mean the model cannot identify the profit-maximising price."}]},{"id":"72f46b30-069b-45a3-95e4-160fe1a7262f","cardType":"cloze","points":null,"front":"For the example price cut, $PED = \\dfrac{+50}{-20} = \\text{\\text{[...]}}$, so demand is elastic.","back":"For the example price cut, $PED = \\dfrac{+50}{-20} = \\text{\\boxed{-2.5}}$, so demand is elastic.","mcqOptions":[{"text":"$$-2.5$","correct":true,"explanation":"Price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price. Dividing $+50$ by $-20$ gives $-2.5$, indicating elastic demand."},{"text":"$$-0.4$","correct":false,"explanation":"This reverses the division, calculating $-20 \\div +50$ rather than $+50 \\div -20$. The correct elasticity is $-2.5$, whose absolute value exceeds one."},{"text":"$$+2.5$","correct":false,"explanation":"This loses the negative sign from the inverse relationship between price and quantity demanded. Dividing $+50$ by $-20$ gives the correct value of $-2.5$."},{"text":"$$-1.5$","correct":false,"explanation":"This is a plausible arithmetic slip caused by subtracting the percentage changes instead of dividing them. The required calculation is $+50 \\div -20 = -2.5$."}]},{"id":"f206e1e7-7c6d-4053-86af-36a84a1add20","cardType":"cloze","points":null,"front":"At the kink price of £10, selling 100 units gives total revenue of [ ].","back":"At the kink price of £10, selling 100 units gives total revenue of £1,000.","mcqOptions":[{"text":"£1,000","correct":true,"explanation":"Total revenue equals price multiplied by quantity. Therefore, £10 multiplied by 100 units gives £1,000."},{"text":"£100","correct":false,"explanation":"This uses the price without multiplying by all 100 units, effectively treating the quantity as 10 or making a place-value error. The correct total revenue is £1,000."},{"text":"£10,100","correct":false,"explanation":"This adds the price and quantity rather than multiplying them, and also produces an inappropriate revenue calculation. The correct total revenue is £10 multiplied by 100, or £1,000."},{"text":"£10,000","correct":false,"explanation":"This multiplies £10 by 1,000 instead of by the stated 100 units, adding an extra zero. The correct total revenue is £1,000."}]},{"id":"67a4d3a1-9fb8-4973-ae1d-70a57d5258e6","cardType":"cloze","points":null,"front":"At a price of £12 with quantity 60, total revenue is [ ].","back":"At a price of £12 with quantity 60, total revenue is £720.","mcqOptions":[{"text":"£720","correct":true,"explanation":"Total revenue is calculated as price multiplied by quantity. With a price of £12 and sales of 60 units, the revenue is £12 multiplied by 60, giving £720."},{"text":"£72","correct":false,"explanation":"This drops a zero from the quantity calculation or treats 60 units as 6. Multiplying £12 by the stated 60 units gives the correct total revenue of £720."},{"text":"£600","correct":false,"explanation":"This uses the quantity as though each unit generated £10 rather than £12. The correct calculation is £12 multiplied by 60, producing £720."},{"text":"£7,200","correct":false,"explanation":"This adds an extra zero, effectively multiplying £12 by 600 rather than 60. The correct total revenue is £12 multiplied by 60, which equals £720."}]},{"id":"98d34eb2-2568-4aaa-a987-3f4f5b743e53","cardType":"cloze","points":null,"front":"At a price of £8 with quantity 110, total revenue is [ ].","back":"At a price of £8 with quantity 110, total revenue is £880.","mcqOptions":[{"text":"£880","correct":true,"explanation":"Total revenue equals price multiplied by quantity. Multiplying £8 by 110 units gives £880."},{"text":"£118","correct":false,"explanation":"This adds the price and quantity instead of multiplying them, producing £8 plus 110. The correct total revenue is £8 multiplied by 110, which equals £880."},{"text":"£88","correct":false,"explanation":"This drops a zero from the quantity or treats 110 units as 11. Multiplying £8 by the full quantity of 110 gives £880."},{"text":"£1,080","correct":false,"explanation":"This adds £200 to the correct result, suggesting the quantity or price was misread during multiplication. The correct calculation remains £8 multiplied by 110, giving £880."}]},{"id":"81b41943-b375-4e00-8a7d-2ab944a1cdda","cardType":"cloze","points":null,"front":"The kinked demand curve produces a discontinuous marginal revenue curve because rivals' reactions create a [ ] below the kink.","back":"The kinked demand curve produces a discontinuous marginal revenue curve because rivals' reactions create a vertical gap below the kink.","mcqOptions":[{"text":"vertical gap","correct":true,"explanation":"Rivals match a price cut but do not follow a price increase, creating a discontinuity in the demand curve’s marginal revenue below the kink."},{"text":"horizontal gap","correct":false,"explanation":"The discontinuity concerns marginal revenue values at a given output, not a missing range of quantities. Rival reactions create a vertical gap below the kink."},{"text":"parallel shift","correct":false,"explanation":"Rivals’ asymmetric responses do not shift the whole demand curve in parallel. They produce a discontinuity in marginal revenue, represented by a vertical gap below the kink."},{"text":"constant slope","correct":false,"explanation":"A constant slope would imply no change in marginal revenue’s continuity. The kink caused by differing rival reactions creates a vertical gap below it."}]}]}],"examCountdown":null,"heading":"7.8.5 relationship between price elasticity of demand and a firm’s revenue","title":"7.8.5 relationship between price elasticity of demand and a firm’s revenue Flashcards","topbar":{"backHref":"/international-a-level/economics/cie/flashcards"},"topicSidebar":"$L90"}]}],"topicId":"77409d60-5999-412f-bcef-e993624c1468","walled":"$L91"}],"$L92","$L93"]