If the Price of a Good Increases by 10 Percent

question 120

Multiple Choice

If the price of a good increases by 10 percent and its quantity demanded drops by 50 percent, the price elasticity of demand is:

• A) 1.0.
• B) 0.2.
• C) −5.0.
• D) 2.0.

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Definitions:

Opportunity Cost

The cost of foregone alternatives when one option is chosen over another.

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A popular beverage made from roasted and ground beans of the Coffea plant, consumed worldwide for its stimulating effects.

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A diagram that maps out all possible highest outputs for two commodities, given a predetermined set of inputs and technology.

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The process by which individuals or entities focus their efforts on a limited range of activities, goods, or services to gain efficiencies and improve performance or output.