Q1:
A: Demand increases
B: Demand falls
C: Let A and B be substitute goods. If the price of A increases, the quantity demanded of A decreases (law of demand). Because consumers can easily buy good B instead of good A, they will purchase more of good B (because good A is more expensive) and hence the demand for good B will increase.
D: If goods A and B are complements, an increase in the price of A will result in a leftward movement along the demand curve of A and cause the demand curve for B to shift in

Q2:
Total Revenue is TR=P*Q= (600 - 4Q)*Q
Marginal Revenue is MR=dTR/dQ= 600-8Q
When MR=0 600-8Q=0 Then Q=75 so P=600-4*75= 300 so Price is 300 which TR is maximized.
Ed= (ΔQ/ΔP )* (P/Q)=-4*(100/125)= - 3.2 * If |PED| > 1 then Demand is Price Elastic (Demand is sensitive to price changes) * If |PED| = 1 then Demand is Unit Elastic * If |PED| < 1 then Demand is Price Inelastic (Demand is not sensitive to price changes)
Ignore the negative sign
Revenue is maximized when price is set so that the Price elasticity of demand (PED) is exactly one. When Ed=1, P/Q=0.25 so P=35

Income elasticity of demand measures the responsiveness of demand to changes in the consumer income: is Ei =(ΔQ/ΔI )* (I/Q)

Q3:
A: False. Since plastic surgery is price inelastic, which means the demand is not sensitive to the price changes.
B: False. Since plastic surgery is price inelastic, |PED| =|(ΔQ/Q)/( ΔP/P)|< 1, which means the percentage change in the price of plastic surgery is more than the percentage change in quantity demanded.
C: True. Because the demand is not sensitive to the price changes.
D: False. Graphically, this different degree of responsiveness is reflected in the steepness of the demand curve. Since the demand curve is very steep, quantity demanded is not quite responsive to changes in price
E: False. Total revenue = Price *