If the Price Elasticity of Demand for a Good Is

question 185

Multiple Choice

If the price elasticity of demand for a good is 0.8,then a 12 percent increase in the quantity demanded must be the result of

• A)a 0.06 percent decrease in the price.
• B)a 1.5 percent decrease in the price.
• C)a 9.6 percent decrease in the price.
• D)a 15 percent decrease in the price.

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Definitions:

Marginal Revenue Function

A mathematical representation of the change in total revenue resulting from the sale of one additional unit of a product or service.

Marginal Cost Function

A mathematical representation that shows the change in total cost associated with producing one additional unit of output.

Total Revenue

The entire amount of money generated from sales of goods or services before any expenses are deducted.

CVP Model

The Cost-Volume-Profit model, a financial analysis tool used to determine the effects of varying levels of cost and volume on a company's profits.