Using the Midpoint Method,the Price Elasticity of Demand for a Good

question 248

Multiple Choice

Using the midpoint method,the price elasticity of demand for a good is computed to be approximately 0.75.Which of the following events is consistent with a 10 percent decrease in the quantity of the good demanded?

• A)a 7.5 increase in the price of the good
• B)a 13.33 percent increase in the price of the good
• C)an increase in the price of the good from $7.50 to $10
• D)an increase in the price of the good from $10 to $17.50

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Definitions:

Current Yield

The annual interest payment of a bond divided by its current market price, used to compare the return on investment of different bonds.

Coupon Bond

A debt security that pays the holder a fixed interest rate (the coupon) periodically until maturity, at which point the principal is repaid.

Basis Point

A unit of measure used in finance to describe the percentage change in the value or rate of a financial instrument, equal to 1/100th of 1%.

Bond Prices

The cost or value of a bond, which can fluctuate based on interest rates, credit quality of the issuer, and other factors.