Information on the Price Elasticity of Demand Is Particularly Important

question 30

Multiple Choice

Information on the price elasticity of demand is particularly important to managerial decision making because:

• A)the higher the price elasticity of demand for a product is, the more profitable it will be to produce more of it.
• B)depending on the elasticity coefficient, decision makers will immediately know if a price change will cause profits to increase or decrease.
• C)it allows one to predict how total revenue will respond, i.e., increase or decrease, to a change in price.
• D)as the price elasticity coefficient approaches one, profits will increase.

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Definitions:

Accounts Receivable

Money owed to a company by its customers for products or services already delivered but not yet paid for.

Credit Sale

involves selling goods or services to a customer with payment to be received at a later date.

Indirect Cost

Expenses that are not directly attributable to a specific product, service, or project, such as utilities or rent for office space.