Microsoft Raises the Price of Its Office Software by 10

question 303

Multiple Choice

Microsoft raises the price of its Office software by 10 percent. As a result, the quantity of personal computers demanded at the current price decreases by 5 percent. What is the cross elasticity of demand for personal computers with respect to the price of Microsoft Office software?

• A) -2.0
• B) -0.5
• C) 0.5
• D) 2.0

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Definitions:

Interest Charged

The cost incurred for borrowing money or the amount earned on deposited funds, usually expressed as a percentage of the principal.

Contingent Liability

A potential financial obligation that may arise depending on the outcome of a future event.

Contingent Liabilities

Liabilities that may arise from past transactions if certain events occur in the future.

Interest Expense

The cost incurred by an entity for borrowed funds; interest expense is a non-operating expense shown on the income statement.