If a 1 Per Cent Increase in the Price of X

question 89

Multiple Choice

If a 1 per cent increase in the price of X increases the quantity demanded of Y by 2 per cent, then X and Y are

• A) normal goods and the income elasticity of demand of each equals 2.
• B) substitutes and the cross elasticity of demand equals 2.
• C) substitutes and the cross elasticity of demand equals 1/2.
• D) complements and the cross elasticity of demand equals 2.
• E) complements and the income elasticity of demand equals 2.

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Definitions:

Concession Stand

A vendor booth or stall that sells snacks, drinks, and other small items at events, in public places, or in entertainment venues.

Erosion

In a financial context, erosion refers to the gradual reduction of assets or earnings, primarily due to costs, wear and tear, or obsolescence.

Cash Flows

Cash flows refer to the net amount of cash being transferred into and out of a business, often used to analyze the liquidity and financial health of a company.

Fixed Assets

Fixed assets are long-term tangible assets that are used in the operations of a business and are not expected to be converted to cash within a year.