If the Demand for a Good Is Elastic, Then Firms

question 28

Multiple Choice

If the demand for a good is elastic, then firms producing the good should ________ price in order to increase revenue.

• A) increase
• B) decrease
• C) hold constant
• D) either increase or decrease

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Definitions:

Interest Rate

The cost of borrowing money, typically expressed as a percentage of the amount borrowed.

Fiscal Policy

The employment of expenditure and tax policies by a government to affect economic conditions.

Government Spending

Expenditures made by the government sector on goods and services, including salaries of public servants, public investments, and social security benefits.

Aggregate Demand

The collective requirement for goods and services in an economy, determined at a particular price point over a defined period.