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:

Break-even Point

The point at which total costs and total revenue are equal, meaning there is no net loss or gain.

Long-run Supply Curve

A graphical representation showing the relationship between the price level and the quantity of output that producers are willing to supply, taking into account all factors of production can be varied.

Profitable Output

The production or output level from a business operation that generates a financial gain or profit.

Firm

An organization engaged in commercial, industrial, or professional activities, typically with the aim of earning a profit.