A Value of the Absolute Price Elasticity of Demand Equal

question 50

Multiple Choice

A value of the absolute price elasticity of demand equal to 2.5 indicates that

• A) a 5% decrease in price leads to a 2% increase in quantity demanded.
• B) a 2% decrease in price leads to a 25% increase in quantity demanded.
• C) a 1% decrease in price leads to a 2.5% increase in quantity demanded.
• D) a 0.25% decrease in price leads to a 1% increase in quantity.

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Definitions:

Prior Service Cost

A pension accounting term referring to the cost of benefits attributed to employee service in prior periods, often arising from plan amendments.

Pension Expense

The cost recognized by an employer for maintaining a defined benefit pension plan for its employees.

Defined Benefit Plans

Pension plans that promise a specified retirement benefit amount, which is determined by factors such as salary history and duration of employment.

Interest Cost Component

The portion of pension expense that represents the increase in the projected benefit obligation due to the passage of time.