Assuming Price Elasticity of Demand Is Reported as an Absolute

question 128

Multiple Choice

Assuming price elasticity of demand is reported as an absolute value, a price elasticity of demand of 0.4 indicates an _____ demand, meaning the percentage change in quantity demanded will be _____ than the percentage change in price.

• A) elastic; greater
• B) inelastic; greater
• C) elastic; less
• D) inelastic; less

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Definitions:

Constrained Resource

A limited resource that restricts a company's ability to produce goods, offer services, or achieve its objectives.

Contribution Margin

The difference between the sales revenue and variable costs of a product, showing how much revenue contributes towards covering fixed costs and generating profit.

Avoidable Costs

Expenses that can be eliminated if a particular decision is made or if an activity is ceased.

Sunk Costs

Costs that have already been incurred and cannot be recovered, and should not affect future business decisions.