In General, When the Price Elasticity of Demand Is Greater

question 32

Multiple Choice

In general, when the price elasticity of demand is greater than 1 and a firm wants to increase total revenue, the firm should:

• A) decrease prices.
• B) increase prices.
• C) advertise less.
• D) advertise more.

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Definitions:

FTSE

An acronym for the Financial Times Stock Exchange, referring to major stock market indices such as the FTSE 100 in the United Kingdom.

Put Option

An economic arrangement allowing the holder the option, without being compelled, to sell a designated quantity of an underlying asset at an agreed-upon price within a defined period.

Exercise Price

The price at which the holder of an options contract may buy (in the case of a call) or sell (in the case of a put) the relevant security or commodity.

Expiration Date

In finance, the date at which a derivative contract such as an option or futures agreement ceases to exist.