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:

Marginal Rate

The rate at which a change is made from one level to another, often used in the context of taxes or interest rates.

Indifference Curve

A graph representing combinations of goods or services among which a consumer is indifferent.

Substitution

The process of replacing one good or service with another, often due to changes in relative prices, quality, or availability.

Marginal Rate

A measure of the change in a variable (often cost, revenue, or profit) as it relates to a unit change in another variable.