If the Elasticity of Demand Is 3,and the Price Rises

question 36

Multiple Choice

If the elasticity of demand is 3,and the price rises by 15 percent,then

• A)The quantity demanded will increase by 5 percent.
• B)The quantity demanded will fall by 45 percent.
• C)The quantity demanded will rise by 4.5 percent.

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Definitions:

Discounted Free Cash Flow

A valuation method that estimates the value of an investment based on its expected future cash flows, adjusted for the time value of money.

Market Value

The ongoing market rate for buying or selling a product or service in the open market environment.

Discounted Free Cash Flow Approach

A valuation method that estimates the value of an investment based on its expected future cash flows, discounted back to their present value.

Free Cash Flows

The amount of cash generated by a business after accounting for capital expenditures, available for distribution among all the securities holders of an entity.