If the Price Elasticity of Demand Is Equal to 2

question 79

Multiple Choice

If the price elasticity of demand is equal to 2, a 1 percent increase in price will cause the quantity demanded to ____ by ____ percent.

• A) decrease; 5
• B) increase; 2
• C) decrease; 0.5
• D) decreas
• E) increas

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Definitions:

Producer Surplus

The difference between the amount a producer is willing to accept for a good or service versus what they actually receive in the market.

Government Policy

Governmental actions intended to influence economy or social behavior, including laws, regulations, and fiscal decisions.

Producer Surplus

The difference between the price sellers are content to take for a product or service and the financial outcome they achieve.

Producer Surplus

The difference between what producers are willing to accept for a good versus what they actually receive, essentially measuring the net benefit to producers from selling at a market price above their minimum acceptable price.