The Concept of Price Elasticity Can Be Applied To

question 89

Multiple Choice

The concept of price elasticity can be applied to:

• A) demand, but not supply.
• B) supply, but not demand.
• C) both supply and demand.
• D) neither supply nor demand.

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Definitions:

Diseconomies of Scale

The phenomenon where an increase in production leads to higher costs per unit due to inefficiencies that arise from scaling up operations.

Increasing Returns

An increase in a firm’s output by a larger percentage than the percentage increase in its inputs.

Diminishing Returns

A principle stating that after a certain point, additional investment or effort yields progressively smaller increases in output.

Marginal-cost Curve

The marginal-cost curve represents how the cost of producing one additional unit of a good changes as its production volume varies.