Sellers Should Know That the Less Elastic the Demand for Their

question 94

Multiple Choice

Sellers should know that the less elastic the demand for their product, the more advantageous it is for them to ________.

• A) drop the price
• B) raise the price
• C) maintain the price
• D) discontinue the item
• E) bundle the item with another product

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Definitions:

Marginal Product

The incremental increase in output resulting from the use of one additional unit of a resource, while keeping other resources constant.

Variable Resource

A factor of production whose quantity can easily be changed in the short term to increase or decrease production levels.

Fixed Resource

An asset or resource in production that cannot be easily increased or decreased in the short term, such as land or machinery.

Diminishing Returns

The principle that says as more of a variable input is added to a fixed input, the incremental gain in output will eventually decrease.