If a 5 Percent Change in the Price of a Good

question 54

Multiple Choice

If a 5 percent change in the price of a good leads to a 10 percent change in the quantity supplied, then the supply of the good is ________ and the elasticity of supply is ________.

• A) inelastic; 0.5
• B) inelastic; 2.0
• C) elastic; 0.5
• D) elastic; 2.0

Grasp the factors that affect price elasticity of demand, such as the availability of substitutes and whether a good is a luxury or a necessity.

Analyze the impact of price changes on demand elasticity using the midpoint method.

Apply concepts of elasticity to real-world scenarios involving commodities and services.

Understand the relationship between demand elasticity and total revenue.

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Definitions:

Financing Policies

These are strategies that a company formulates for managing its finances, including decisions on debt, equity, and internal financing methods.

Equity Multiplier

A financial leverage ratio that measures the portion of a company's assets that are financed by shareholders' equity.

Debt Ratio

The debt ratio measures a company's financial leverage, calculated by dividing total liabilities by its total assets.

Rational Self-Interest

The principle that individuals tend to make decisions that maximize their own utility or benefit, underpinning much of economic theory.