Business People Often Speak About Price Elasticity Without Actually Using

question 19

Multiple Choice

Business people often speak about price elasticity without actually using the term. Which statement describes a good with an elastic demand?

• A) "A price cut won't help me. It won't increase my sales, and I'll just get less money for each unit."
• B) "I don't think a price cut will help my bottom line any. Sure, I'll sell a bit more, but I'll more than lose because the price will be lower."
• C) "My customers are real shoppers. After I cut my prices just a few cents below those my competitors charge, customers have been flocking to my store and sales are booming."
• D) "The economic expansion has done wonders for my sales. With more people back at work, my sales are taking off!"

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Definitions:

Utility Function

A mathematical representation of how a consumer ranks different bundles of goods according to the level of satisfaction or happiness they provide.

Endowed

Provided with a quality, ability, or asset; often used in the context of endowed chairs in academia or endowed grants/funds.

Desert Island

A remote, uninhabited island, often used in hypothetical scenarios or survival narratives.

Competitive Equilibrium

A market state where supply equals demand, with no external influences, and prices are such that the quantity supplied is equal to the quantity demanded.