If the Price Elasticity of Demand for Peaches Is 1

question 47

Multiple Choice

If the price elasticity of demand for peaches is 1.76 and the price elasticity of demand for apples is 1.59, then consumers are

• A)more sensitive to a change in the price of apples than they are to a change in the price of peaches.
• B)more sensitive to a change in the price of peaches than they are to a change in the price of apples.
• C)more likely to substitute strawberries for peaches than for apples.
• D)more likely to substitute strawberries for apples than for peaches.
• E)eating more peaches than apples.

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Definitions:

Relative Opportunity Costs

The loss of potential gain from other alternatives when one alternative is chosen, expressed in terms of the ratio between the cost of the chosen alternative and the cost of the next best alternative.

Opportunity Cost

The cost of forfeiting the next best alternative when one option is chosen over another.

Comparative Advantage

The capability of a company, individual, or country to manufacture a product or offer a service with a reduced opportunity cost than competing entities.

Specialization

The process of focusing efforts and resources on a limited range of activities, goods, or services to gain efficiency or expertise.