The Price of Product X Is Reduced from $100 to $90

question 173

Multiple Choice

The price of product X is reduced from $100 to $90 and, as a result, the quantity demanded increases from 50 to 60 units. Therefore, demand for X in this price range

• A)has declined.
• B)is of unit elasticity.
• C)is inelastic.
• D)is elastic.

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Definitions:

Operating Leverage

A measure of how revenue growth translates into growth in operating income, indicating a company’s fixed versus variable costs.

Variable Costs

Charges that adjust in direct proportion to the manufacturing output or the quantity of sales.

Fixed Costs

These are consistent expenses incurred by a business, regardless of production levels or sales volumes, such as rent or salaries.

Profit-Volume Chart

A chart plotting only the difference between total sales and total costs for various levels of units sold.