Price Elasticity of Demand Tells Us the Responsiveness of

question 36

Multiple Choice

Price elasticity of demand tells us the responsiveness of

• A)quantity demanded to a change in the price of a substitute good.
• B)quantity demanded to a change in quantity supplied of a good.
• C)price to a 1 percent change in quantity demanded.
• D)quantity demanded to a 1 percent change in price.

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Definitions:

Fixed Costs

Financial obligations like rent, wages, and insurance that are stable and do not vary with the level of goods manufactured or sold.

Break-even

The point at which total revenues equal total costs, resulting in neither profit nor loss for the business.

Margin of Safety

The difference between actual or projected sales and the break-even point. It indicates the amount of sales decline a business can endure before it starts incurring losses.

Variable Costs

Costs that change in proportion to the level of activity or production volume.