If the Price Elasticity of Demand for a Good Is

question 458

Multiple Choice

If the price elasticity of demand for a good is 0.25,then a 20 percent decrease in price results in a

• A) 0.0125 percent increase in the quantity demanded.
• B) 4 percent increase in the quantity demanded.
• C) 5 percent increase in the quantity demanded.
• D) 80 percent increase in the quantity demanded.

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Definitions:

Nominal Wages

Wages that are paid to workers in current dollars, without adjustment for inflation.

Price Level

A measure of the average of current prices across the entire spectrum of goods and services produced in the economy.

Real Wages

Wages adjusted for inflation, representing the purchasing power of the income received by workers for their labor.

Wage Differentials

The variations in wage rates due to factors like occupation, industry, geographic location, or skills, affecting income distribution among workers.