The Price Elasticity of Demand for New Cars Is 1

question 8

Multiple Choice

The price elasticity of demand for new cars is 1.2. Hence, a 10 per cent price increase will

• A) decrease the quantity of new cars demanded by 1.2 per cent.
• B) increase consumer expenditure on new cars by 1.2 per cent.
• C) increase consumer expenditure on new cars by 12 per cent.
• D) decrease the quantity of new cars demanded by 12 per cent.

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Definitions:

AGI

Adjusted Gross Income (AGI) is an individual's total gross income minus specific deductions. It is an important figure for calculating taxable income on the federal income tax return.

Deductible IRA Contribution

A Deductible IRA Contribution refers to the funds an individual can contribute to a traditional IRA account which can then be deducted from their taxable income for that year, subject to certain IRS guidelines and income limits.

Pension Plan

A retirement plan offered by an employer which provides a fixed payout upon retirement, often based on salary and years of service.

401(k) Plan

A retirement savings plan sponsored by an employer allowing employees to save and invest a portion of their paycheck before taxes are taken out.