Use the Following to Answer Question(s): Demand and Price Elasticity

question 159

Multiple Choice

Use the following to answer question(s) : Demand and Price Elasticity 2

-(Exhibit: Demand and Price Elasticity 2) The price elasticity of demand between points A and B is:

• A) elastic, since total revenue falls when price falls from $8 to $6.
• B) elastic, since total revenue increases when price falls from $8 to $6.
• C) inelastic, since the percentage change in quantity is less than the percentage change in price when price falls from $8 to $6.
• D) positive, because the slope is negative.

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Definitions:

Expected Value

The weighted average of all possible values that a random variable can take on, with weights being the probabilities of each outcome.

Expected Value

The forecasted value of a variable, determined by adding together all potential values, each weighted by its likelihood of happening.

Risk Neutral

A situation or attitude where an individual or entity is indifferent to risk when making a decision.

Risk Lovers

Individuals or entities who prefer or are attracted to investments or situations with a higher level of uncertainty and potential for greater returns.