The Price of Notebooks Is $5, and at That Price

question 218

Multiple Choice

The price of notebooks is $5, and at that price consumers demand 12 notebooks. If the price rises to $7, consumers will decrease consumption to 4 notebooks. Using the midpoint formula, what is the price elasticity of demand for notebooks?

• A) 0.33
• B) 3
• C) 0.17
• D) 6

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Definitions:

Impairment Model

Impairment Model is an accounting method that requires assets to be reviewed for impairment, whereby their carrying value is adjusted to reflect their recoverable amount if this is less than their current book value.

Indefinite-Lived Assets

Non-physical assets without a predefined expiry date in terms of economic benefits or usefulness.

Amortization

The systematic reduction of a loan or the spreading out of capital expenses for intangible assets over a specific period of time for accounting and tax purposes.

Fair Value

Fair value is the price that would be received for selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.