A Product Is Likely to Have a Price Elasticity of Demand

question 12

Multiple Choice

A product is likely to have a price elasticity of demand that exceeds 1 when

• A) its price falls.
• B) the percentage of income spent on it decreases.
• C) it is a necessity.
• D) it has close substitutes.

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Definitions:

MRP

Material Requirements Planning (MRP) is a system for planning production, scheduling activities, and controlling inventory used in overseeing manufacturing operations.

MPP

Marginal Physical Product, the additional output resulting from the use of one more unit of a variable input, holding all other inputs constant.

MRP

Marginal Revenue Product; the additional revenue generated from employing one more unit of a resource or factor of production.

Substitution Effect

The change in demand for a good or service that occurs when its price increases or decreases, leading consumers to substitute it with other goods or services that are relatively more or less expensive.