Suppose a Fast-Food Chain Determines That the Price Elasticity of Demand

question 38

Multiple Choice

Suppose a fast-food chain determines that the price elasticity of demand for its hamburgers is 1.7,and the price of the hamburger is currently $4.00.What will be the effect on quantity demanded and total expenditure on this chain's hamburgers if the price is increased to $6.00?

• A)Quantity demanded will fall by 68% and total expenditure will decrease.
• B)Quantity demanded will fall by 11.76% and total expenditure will decrease.
• C)Quantity demanded will fall by 17% and total expenditure will increase.
• D)Quantity demanded will fall by 1.7% and total expenditure will increase.
• E)Quantity demanded will fall by 34% and total expenditure will decrease.

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Definitions:

Shipping Costs

These are expenses incurred in transporting goods from one location to another, typically covered by the seller or the buyer, depending on the shipping terms.

GAAP

Generally Accepted Accounting Principles (GAAP) are a collection of commonly followed accounting rules and standards for financial reporting.

IFRS

International Financial Reporting Standards, which are globally accepted guidelines for financial reporting established by the International Accounting Standards Board.

Perpetual Inventory System

This accounting practice immediately logs the sale or acquisition of inventory via computerized point-of-sale systems and software for managing enterprise assets.