If a 1 Percent Increase in the Price of X

question 25

Multiple Choice

If a 1 percent increase in the price of X increases the quantity demanded of Y by 2 percent,then X and Y are

• A) complements and the cross elasticity of demand equals 2.
• B) substitutes and the cross elasticity of demand equals 1/2.
• C) substitutes and the cross elasticity of demand equals 2.
• D) complements and the income elasticity of demand equals 2.
• E) normal goods and the income elasticity of demand of each equals 2.

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Definitions:

Production Budget

A plan detailing the quantity of each product a company aims to produce within a specific timeframe, factoring in projected sales and inventory requirements.

Finished Goods Inventory

Products that have completed the manufacturing process and are ready for sale.

Cash Budget

A financial plan that estimates cash inflows and outflows over a specific period, used for managing liquidity and ensuring a company can meet its obligations.

Budgeted Cash Receipts

An estimation of the cash a company expects to receive within a certain period, based on projected sales or revenue.