If the Price Elasticity of Demand for a Good Is

question 191

Multiple Choice

If the price elasticity of demand for a good is 1.2,then a 3 percent decrease in price results in a

• A)0.4 percent increase in the quantity demanded.
• B)2.5 percent increase in the quantity demanded.
• C)3.6 percent increase in the quantity demanded.
• D)6 percent increase in the quantity demanded.

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Definitions:

Tax

Compulsory financial charges or other types of levy imposed upon a taxpayer by a governmental organization in order to fund government spending and various public expenditures.

Producer Surplus

The differentiation between the accepted selling price by producers for a product or service and the final earning.

Consumer Surplus

The gap between what consumers are ready and financially able to spend on a good or service and what they actually spend.

Tax

An obligatory fee or some other type of financial imposition placed on a taxpayer by a government organization, designed to cover the cost of government activities and diverse expenditures in public services.