If the Price Elasticity of Demand Is 0

question 24

Multiple Choice

If the price elasticity of demand is 0.5,then a 10% increase in price results in a

• A)50% reduction in quantity demanded.
• B)5% increase in quantity demanded.
• C)5% decrease in total revenues.
• D)5% decrease in quantity demanded.
• E)0.5% decrease in quantity demanded.

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Definitions:

Asymmetric Information

Asymmetric information occurs when one party in a transaction has more or better information than the other, leading to an imbalance in the decision-making process.

Unsuspecting Buyer

A consumer who purchases goods or services without being aware of all the relevant information, often leading to disadvantageous situations.

Auto Transmission

A type of vehicle transmission that automatically changes gear ratios as the vehicle moves, without input from the driver.

Adverse Selection

A situation in insurance and other markets where buyers and sellers have different information, leading those more likely to produce negative outcomes to participate more actively.