When Small Changes in Price Lead to Infinite Changes in Quantity

question 25

Multiple Choice

When small changes in price lead to infinite changes in quantity demanded,can be said of demand

• A)Demand is perfectly elastic and will be horizontal.
• B)Demand is perfectly inelastic and will be horizontal.
• C)Demand is perfectly elastic and will be vertical.
• D)Demand is perfectly inelastic and will be vertical.

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Definitions:

Cost Drivers

Factors that cause a change in the cost of an activity, impacting the economic amount associated with production or delivery of a service.

Variable Costs

Costs that vary in direct proportion to changes in production or sales volumes, such as raw materials and direct labor.

Fixed Costs

Costs that do not change with the level of output or production, such as rent, salaries, and insurance.

Predetermined Overhead Rate

A rate used to allocate overhead costs to products or job orders, calculated based on estimated overhead costs and an allocation base at the beginning of a period.