The Cross Price Elasticity of Demand for Poultry with Respect

question 157

Multiple Choice

The cross price elasticity of demand for poultry with respect to the price of ground beef has been estimated to be 0.23.If the price of ground beef falls by 20 percent in a period, how will that affect the demand for poultry in that period, all other things unchanged?

• A) The demand for poultry will rise.
• B) The demand for poultry will remain unchanged.
• C) The demand for ground beef will increase, but the demand for poultry will fall.
• D) The demand for ground beef will not change, but the demand for poultry will fall.

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Definitions:

User Cost

The cost of using a resource, which includes the opportunity cost of not keeping the asset intact or not using it for an alternative purpose.

Rental Rate

Cost per year of renting one unit of capital.

Competitive Market

A competitive market is a market structure characterized by many buyers and sellers, such that no single participant has significant influence over the price of products or services.

Isocost Curve

An isocost curve represents all combinations of inputs which result in the same total cost for a firm, essentially showing the trade-offs between different types of inputs while maintaining the same budget.