If a 4 Percent Change in the Price of a Good

question 154

Multiple Choice

If a 4 percent change in the price of a good leads to a 3 percent change in quantity demanded,the price elasticity of demand equals

• A) 1.33.
• B) 0.75.
• C) 4.00.
• D) 3.44.
• E) None of the above answers are correct.

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Definitions:

Trading Barriers

Restrictions or laws that limit the ability to trade goods, services, or financial instruments across borders or within markets.

Absolute Purchasing Power Parity

A theory that asserts that in the absence of market frictions, identical goods in different countries should have identical prices when expressed in a common currency.

Transactions Costs

The expenses associated with buying or selling goods and services, including fees, taxes, and other charges.

Absolute Purchasing Power Parity

A theory which asserts that exchange rates between currencies are in equilibrium when their purchasing power is the same in each of the two countries.