Given the Demand Function Q_X = 1500 - 100P_X

question 24

Multiple Choice

Given the demand function Q_X = 1500 - 100P_X + 75P_Y + 1.5I + .06A where P_Y = $40.00. I = $2500, and A = $5,000. When price of good X is increased from $60.00 to $75.00, what is the arc price elasticity of demand for good X over this range?

• A) 7.05
• B) -7.05
• C) 9.08
• D) -9.08
• E) none of the above

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Definitions:

Periodic Inventory System

A method of inventory valuation in which updates to inventory levels and cost of goods sold are made periodically, such as at the end of the fiscal year.

Gross Method

An accounting approach for recording purchases at the invoice’s gross amount without deducting any cash discounts for early payment.

Merchandise

Goods bought and sold in the course of business operations.

Periodic Inventory System

An accounting system that records inventory purchases during the accounting period but waits until the end of the period to adjust the inventory balances and record cost of goods sold.