If the Cross-Price Elasticity of Demand for SUVs with Respect

question 125

Multiple Choice

If the cross-price elasticity of demand for SUVs with respect to the price of gasoline is -0.10,and gasoline prices rise by 18 percent,then SUV sales should,ceteris paribus,

• A)Fall by 1.8 percent.
• B)Fall by 18 percent.
• C)Rise by 1.8 percent.
• D)Rise by 18 percent.

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Definitions:

Suggested Retail Price

The price that manufacturers recommend retailers to sell their products for to consumers, often seen as MSRP (Manufacturer's Suggested Retail Price).

Cash Discounts

A reduction in the price of goods or services offered to buyers as an incentive for early payment or payment in cash.

Quantity Discounts

Price reductions based on the volume or amount of product purchased, incentivizing bulk buying.

Trade Discounts

A reduction in the listed price of a product or service offered by sellers to buyers engaged in trade or commerce.