If the Price Elasticity of Demand Is Computed for Two

question 219

Multiple Choice

If the price elasticity of demand is computed for two products, and product A measures .79, and product B measures 1.6, then:

• A) product A is more price elastic than product B.
• B) product B is more price elastic than product A.
• C) consumers are more sensitive to price changes in product A than in product B.
• D) product B is more price inelastic than product A.
• E) products A and B must be substitutes.

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Definitions:

Money Market Mutual Funds

Investment funds that pool money from investors to purchase short-term, high-quality debt securities like treasury bills and commercial paper.

M1

A category of the money supply that includes all physical money like coins and currency, as well as demand deposits and checking accounts.

Commercial Banks

Financial institutions that offer a wide range of services such as accepting deposits, issuing loans, and providing basic investment products to the public and businesses.

Selling Securities

The act of offering stocks, bonds, or other financial instruments for sale to investors, either through public offerings or via private placements.