The Price Elasticity of Demand for Widgets Is 0

question 37

Multiple Choice

The price elasticity of demand for widgets is 0.4. Assuming no change in the demand curve for widgets, a 6 percent decrease in sales implies a(n)

• A)13.5 percent increase in price.
• B)18 percent increase in price.
• C)15 percent increase in price.
• D)2.4 percent increase in price.

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Definitions:

Depreciation Expense

An accounting method that allocates the cost of a tangible asset over its useful life, reflecting the asset's consumption, wear and tear, or obsolescence.

Temporary Difference

A discrepancy between the tax basis of an asset or liability and its carrying amount on the balance sheet, which will eventually settle and affect taxable income.

Book Income

A company's income as reported in its financial statements, representing the difference between revenues and expenses.

Income Tax Rate

The portion of a person's or company's earnings that is handed over to the state in the form of taxes.