The Price Elasticity of Demand for Coffee Is 2

question 28

Multiple Choice

The price elasticity of demand for coffee is 2.2 and the price elasticity of supply for coffee is 1.8.If demand increases by 20%,the percentage change in the equilibrium price of coffee will

• A) rise by 5%.
• B) fall by 5%.
• C) rise by 0.2%.
• D) fall by 0.2%.

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Definitions:

Fiscal Year

A one-year period that companies and governments use for financial reporting and budgeting, which does not necessarily coincide with the calendar year.

Direct Write-Off Method

An accounting approach where uncollectible debts are written off directly against income at the time they are deemed nonrecoverable.

Bad Debts Expense

Bad debts expense represents the amount of receivables a company estimates it will not collect due to customer defaults.

Trade Receivables

Amounts owed to a business by its customers for goods or services delivered on credit.