Table 7-7 $\begin{array}{|c|c|}\hline \text { Price } & \text { Quantity } \\\hline \$ 35 & 40 \\\hline 25 & 50 \\\hline\end{array}$

question 159

Multiple Choice

Table 7-7
$\begin{array}{|c|c|}\hline \text { Price } & \text { Quantity } \\\hline \$ 35 & 40 \\\hline 25 & 50 \\\hline\end{array}$
-Refer to Table 7-7.Suppose you own a bookstore.You believe that you can sell 40 copies per day of the latest John Grisham novel when the price is $35.You consider lowering the price to $25 and believe this will increase the quantity sold to 50 books per day.Compute the price elasticity of demand using the midpoint formula and these data.Select the correct implication from your work.

• A) The demand for the John Grisham book is inelastic. Revenue will fall if the price is lowered.
• B) The demand for the John Grisham book is elastic. Revenue will rise if the price is lowered.
• C) The demand for the John Grisham book is inelastic. Revenue will rise if the price is lowered.
• D) The demand for the John Grisham book is elastic. Revenue will fall if the price is lowered.

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Definitions:

Installment Sales

A method of recognizing revenue from sales that are paid for over time through multiple payments.

Initial Franchise Fee

A one-time charge that a new franchisee pays to the franchiser for the rights to operate a franchise, covering initial training, support, and access to the business model.

Material Services

Significant or essential services provided that contribute directly to the output of the production process or operational efficiency.

Franchisor

An entity that grants the right to use a brand, product, or operational model to an individual or entity (franchisee), typically for a fee.