The Price Elasticity of Demand for New Cars Is 1

question 92

Multiple Choice

The price elasticity of demand for new cars is 1.2. Hence, a 10 percent price increase will

• A) decrease the quantity of new cars demanded by 1.2 percent.
• B) increase consumer expenditure on new cars by 1.2 percent.
• C) decrease the quantity of new cars demanded by 12 percent.
• D) increase consumer expenditure on new cars by 12 percent.

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Definitions:

Straight-Line Method

It is an approach for evenly distributing the cost of an asset over its useful life.

Useful Life

The estimated period over which an asset is expected to be usable by the entity, impacting depreciation calculations and asset management decisions.

Accumulated Depreciation

The cumulative sum of depreciation costs that have been charged to an asset from the time it was acquired.

Beginning Inventory

The inventory value ready for sale at the onset of an accounting cycle.