Suppose That the Quantity Demanded of Skipping Ropes Rises from 1250

question 13

Multiple Choice

Suppose that the quantity demanded of skipping ropes rises from 1250 to 1750 units when the price falls from $1.25 to $0.75 per unit. The price elasticity of demand for this product is

• A) 2.
• B) 2/3.
• C) 1/3.
• D) 3/2.
• E) 1.

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Definitions:

Degree of Operating Leverage

A financial metric that measures the sensitivity of a company's operating income to its sales volume.

Margin of Safety

The amount by which sales can drop before reaching the break-even point, typically expressed as a percentage of current sales.

Sales

The total revenue generated from goods or services sold by a company.

Net Operating Income

Revenue derived from the principal activities of a business before interest and taxes are subtracted.