Consider the Supply Curve $Q ^ { s } = 2 P$

question 31

Multiple Choice

Consider the supply curve $Q ^ { s } = 2 P$ and the demand curve $Q ^ { d } = 90 - P$ . Which expression best shows how you would calculate the elasticity of demand when $P$ increases by 1 along the demand curve from its equilibrium value?

• A) \([ ( 59 - 60 ) / ( 31 - 30 ) ] \times ( 30 / 60 )\)
• B) \([ ( 56 - 60 ) / ( 31 - 30 ) ] \times ( 30 / 60 )\)
• C) \([ ( 59 - 61 ) / ( 31 - 30 ) ] \times ( 30 / 60 )\)
• D) \([ ( 59 - 62 ) / ( 32 - 30 ) ] \times ( 30 / 60 )\)

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Definitions:

Effective Annual Rate

The actual rate of interest on an investment or loan, taking into account the effect of compounding over a given period.

Compounded

A method of calculating interest where the earned interest on an investment is added to the principal, and future interest is calculated on the total amount.

Annuity

A fiscal product designed to emit a stable series of disbursements to an individual, chiefly intended as support for retired people's income.

Perpetuity

A type of annuity that pays an infinite series of cash flows, continuing forever.