If the Price of a Product Increases by 5 Percent

question 217

Multiple Choice

If the price of a product increases by 5 percent and the quantity demanded decreases by 5 percent,then the elasticity of demand is

• A) 0.
• B) 1.
• C) indeterminate.
• D) 5.
• E) 25.

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Definitions:

Milk

A nutrient-rich liquid food produced in the mammary glands of mammals, commonly consumed by humans as a beverage or used in the production of various dairy products.

Pareto Optimal

A situation or allocation of resources from which it is impossible to reallocate to make any one individual better off without making at least one individual worse off.

Marginal Rate of Substitution

The rate at which a consumer is willing to substitute one good for another while maintaining the same level of utility, reflected in the slope of an indifference curve.

Wheat

A cereal grain that is a staple food in many parts of the world, used to make products like bread, pasta, and flour.