A Recent Sale at a Department Store Advertised 50 Percent

question 59

Multiple Choice

A recent sale at a department store advertised 50 percent price reductions on clothing.The store's clothing sales increased by 200 percent.The price elasticity of demand was

• A) 0.25.
• B) 0.5.
• C) 1.0.
• D) 2.5.
• E) 4.0.

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Definitions:

Substitutes

Goods or services that can be used in place of each other, where an increase in the price of one leads to an increased demand for the other.

Income Elasticity

A measure of how much the quantity demanded of a good changes in response to a change in consumers' income.

Demand Inelastic

When the quantity demanded of a good or service is relatively unchanged in response to price changes.

Directly Related

A situation where two variables move in the same direction, meaning if one increases, the other also increases and vice versa.