The Price Elasticity of Demand for a Certain Agricultural Product

question 35

Multiple Choice

The price elasticity of demand for a certain agricultural product is constant (over the relevant range of prices) and equal to -1.50. The supply elasticity for this product is constant and equal to 4. Originally the equilibrium price of this good was $15 per unit. Then it was discovered that consumption of this product was unhealthy. The quantity that would be demanded at any price fell by 11%. The percent change in the long-run equilibrium consumption of this good was

• A) -11%.
• B) -8%.
• C) -2%.
• D) -12%.
• E) There is not enough information to determine the answer.

---

Definitions:

Straight-line Method

The straight-line method is a depreciation technique that allocates an equal amount of depreciation expense on a tangible asset over its useful life.

Amortization

The process of spreading out the cost of an intangible asset over its useful life.

Discount on Bonds Payable

The amount by which a bond's selling price is less than its face value or principal amount, typically reflecting market interest rates higher than the bond's coupon rate.

Issued at Face Value

A term indicating that a financial instrument, such as a bond, is sold for its original cost, not at a premium or discount.