Suppose a One Percent Change in the Price of Oil

question 16

Multiple Choice

Suppose a one percent change in the price of oil causes a −0.02 percent change in the quantity demanded of oil. Thus, −0.02 is the:

• A) price elasticity of demand.
• B) price elasticity of supply.
• C) cross-price elasticity of demand.
• D) income elasticity of demand.

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Definitions:

Exchange Rate

The exchange rate is the price at which one currency can be exchanged for another currency, affecting international trade and investments by determining how much one country's currency is worth in another's.

Domestic Currency

The currency that is legal tender in a country and used for domestic transactions.

Overvalued Currency

A currency that is traded at a price higher than its intrinsic value, often due to government intervention or speculative demand.

Manufacturing-Dependent

Describes economies or regions that primarily rely on the manufacturing sector for economic growth and employment.