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

question 37

Multiple Choice

Using the midpoint method, the price elasticity of demand for a good is computed to be approximately 1.45. Which of the following events is consistent with a 20 percent decrease in the quantity of the good demanded?

• A)An increase of 29.0 percent in the price of the good
• B)An increase of 13.79 percent in the price of the good
• C)An increase in the price of the good from $29.00 to $20
• D)An increase in the price of the good from $20 to $49.00

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Definitions:

Manufacturing Overhead

All indirect costs associated with manufacturing, such as utilities, rent of the production facility, and maintenance.

Departmental Predetermined

A rate or value established in advance for departments within a business, often used for budgeting, costing, or allocation purposes.

Casting Department

A department within a manufacturing entity responsible for the process of pouring liquid material into a mold to create a solid shape.

Overhead Rate

The ratio used to allocate indirect costs to produced goods, calculated by dividing total overheads by an allocation base.