In 2003,when Music Downloading First Took Off,Universal Music Slashed the Average

question 119

Multiple Choice

In 2003,when music downloading first took off,Universal Music slashed the average price of a CD from $21 to $15.The company expected the price cut to boost the quantity of CDs sold by 30 percent,other things remaining the same.What was Universal Music's estimate of the price elasticity of demand for CDs?

• A)0.9
• B)90
• C)1.11
• D)0.011
• E)0.2

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Definitions:

Mutual Funds

Financial instruments that aggregate funds from various investors to acquire a varied collection of equities, debts, or alternative assets.

Consumer Price Index

An index that measures the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care.

Substitutes

Products that serve similar purposes. An increase in the price of one will cause an increase in demand for the other (examples are hamburgers and tacos, butter and margarine, Chevrolets and Fords).

Cable TV

is a system of delivering television programming to consumers via radio frequency signals transmitted through coaxial cables.