Which of the Following Statements Is True

question 2

Multiple Choice

Which of the following statements is true?

• A)A change in sales should have more impact on current investment if it is expected to be permanent rather than temporary.
• B)On a percentage basis, investment is more volatile than consumption.
• C)In terms of dollars, investment and consumption are about equally volatile.
• D)all of the above
• E) none of the above

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Definitions:

Elastic Demand

A situation where the quantity demanded of a good or service is sensitive to changes in its price.

Total Revenue

The total income earned by a company from its sales of goods or services before any costs or expenses are subtracted.

Demand Elasticity

A measure of how much the quantity demanded of a good responds to a change in the price of that good, with elasticity greater than one indicating a high response to price changes.

Revenue-Maximizing

The strategy of setting prices and production levels to achieve the highest possible revenue, not necessarily leading to the highest profit.