If the Price Elasticity of Demand Is -4

question 103

Multiple Choice

If the price elasticity of demand is -4.0,a 5 percent decrease in price will increase quantity demanded by

• A) 0.8 percent.
• B) 1.25 percent.
• C) 20 percent.
• D) 80 percent.
• E) 125 percent.

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Definitions:

Residual Dividend Approach

A method where the firm pays dividends from the residual or leftover equity after paying for all capital expenditures and working capital needs.

Debt/Equity Ratio

A financial ratio that measures the relative proportion of shareholders’ equity and debt used to finance a company’s assets.

Capital Investment

Funds invested in a firm or enterprise for the purpose of furthering its business objectives, including acquiring assets and launching new ventures.

Liquidating Dividend

A payment made by a corporation to its shareholders from its capital rather than its earnings, often signaling the winding down or dissolution of the company.