When the Price of Peanut Butter Rises by 4 Percent

question 99

Multiple Choice

When the price of peanut butter rises by 4 percent, total revenue decreases by 8 percent. The demand for peanut butter

• A)is elastic.
• B)is inelastic.
• C)is unit elastic.
• D)has a price elasticity equal to 1/2.
• E)has a price elasticity equal to 2.

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Definitions:

Relative Prices

The price of one good or service compared to another, often indicating their opportunity cost or trade-off.

Utility Function

An economic concept that quantifies an individual's satisfaction or happiness, derived from consuming goods and services, represented through a formula.

Indifference Curves

A graph representing different bundles of goods between which a consumer is indifferent, showing the combinations that yield the same level of utility to the consumer.

Engel Curve

Represents the relationship between a consumer's income and the consumption of a particular good, illustrating how purchasing habits change with varying income levels.