After Full Adjustment to a Price Change Has Occurred, the Absolute

question 134

Multiple Choice

After full adjustment to a price change has occurred, the absolute price elasticity of demand for an item is equal to 1. In the short run, the absolute price elasticity of demand for the item was probably

• A) less than 0.
• B) greater than 0.
• C) less than 1.
• D) greater than 1.

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Definitions:

Lottery Winnings

Money or prizes won through a system of random drawing or chance.

Annual Payments

The amounts that need to be paid once every year as part of a financial obligation.

EAR

Effective Annual Rate, a representation of an interest rate that takes into account the compounding of interest, shown as an annual rate.

Preferred Stock

A type of stock that entitles the holder to a fixed dividend, whose payment takes priority over that of common-stock dividends.