Using the Method of Arc Elasticity to Calculate Price Elasticity

question 125

Multiple Choice

Using the method of arc elasticity to calculate price elasticity of demand eliminates the problem of:

• A) different elasticities, depending on whether price decreases or increases.
• B) different elasticities, because price and quantity are inversely related on the demand curve.
• C) total revenue falling when price falls and demand is inelastic.
• D) total revenue increasing when price falls and demand is elastic.

---

Definitions:

Preferences

The subjective tastes and priorities of consumers, influencing their choices among different goods, services, or outcomes.

Income

The total sum of all wages, salaries, profits, interest payments, rents, and other forms of earnings received over a certain period of time.

Convex Preferences

A preference structure in consumer theory where combinations of goods are preferred over single goods, indicating a love for diversification.

Income

A measure of money received by an individual or household over a certain period of time, typically earned through work, investments, or other sources.