Business People Speak About Cross Elasticity of Demand Without Using

question 39

Multiple Choice

Business people speak about cross elasticity of demand without using the actual term. Which one of the following statements reflects cross elasticity of demand?

• A)"A price cut won't help me. It won't increase sales, and I'll just get less money for each unit."
• B)"I don't think a price cut will make any difference to my bottom line. What I may gain from selling more I would lose on the lower price."
• C)"My customers are real bargain hunters. Since I set my prices just a few cents below my competitors, customers have flocked to the store and sales are booming."
• D)"With the recent economic recovery, people have more income to spend and sales are booming, even at the previous prices."
• E)"Since the price of gasoline fell at the neighbouring station, my milk sales have been booming."

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Definitions:

Marginal Tax Rate

The marginal tax rate is the percentage of tax applied to your income for each tax bracket in which you qualify, essentially the rate paid on the last dollar of income.

Average Tax Rate

The proportion of total income that is paid in taxes, calculated by dividing the total taxes paid by the total taxable income.

Marginal Tax Rate

The rate at which the last dollar of income is taxed, indicating the percentage of additional income that will be taxed.

Marginal Tax Rate

The rate at which the next dollar of taxable income will be taxed.