If the Price Elasticity of Demand for a Product Is

question 132

Multiple Choice

If the price elasticity of demand for a product is equal to 0.5,then a 10 percent decrease in price will:

• A) increase quantity demanded by 5 percent.
• B) increase quantity demanded by 0.5 percent.
• C) decrease quantity demanded by 5 percent.
• D) decrease quantity demanded by 0.5 percent.
• The numerator in the elasticity equation is increased by 5 percent and the denominator has decreased 10 percent,so the elasticity coefficient is (5/10)= 0.5.

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Definitions:

Variable Cost Concept

A principle in economics that refers to costs that vary directly with the level of production or service activity.

Rate of Return

A measurement of the gain or loss on an investment over a specific period, expressed as a percentage.

Contribution Margin

The difference between sales revenue and variable costs, used to cover fixed costs and generate profit.

Bottleneck

A point of congestion in a production system that occurs when workloads arrive too quickly for the production process to handle, often leading to delays and lower production efficiency.