When a 2 Percent Increase in Price Generates a Greater

question 49

Multiple Choice

When a 2 percent increase in price generates a greater than 2 percent decrease in quantity demanded, then:

• A) demand is price inelastic.
• B) total revenue increases.
• C) demand is positively sloped.
• D) demand is unit elastic.
• E) total revenue decreases.

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Definitions:

Total Revenues

The overall amount of money generated by a business from its sales or services before any costs or expenses are deducted.

Normal Rate

The standard or average rate at which something occurs, such as interest rates, inflation, or unemployment rates.

Accounting Profit

The net income of a business as calculated by subtracting total expenses from total revenues, according to standard accounting principles.

Economic Profit

The difference between the total revenue generated by a business and the total opportunity costs of all resources used.