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:

Depreciation

A method of allocating the cost of a tangible asset over its useful life.

Interest Receivable

An accounting term for interest that has been earned but not yet received in cash.

Unearned Service Revenue

Income received by a company for services yet to be performed, treated as a liability until the services are provided.

Supplies Expense

The cost associated with consuming supplies over a specific accounting period, impacting the income statement.