If the Price Elasticity of Demand Is 1

question 25

Multiple Choice

If the price elasticity of demand is 1.0 and a firm raises its price by 15 percent,the total revenue will:

• A) Rise by 15 percent.
• B) Fall by 15 percent.
• C) Rise by 6.67 percent.
• D) Not change.

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Definitions:

Interest Rates

Interest rates are the cost of borrowing money or the return for saving and depositing money, typically expressed as a percentage.

Zero-Coupon Bonds

Bonds that do not pay periodic interest payments but are issued at a substantial discount to their face value, maturing at par.

Coupon Rate

The annual interest rate paid by a bond as a percentage of its face value, typically expressed in annual terms.

Par Value

The face value of a bond or the stock value stated in the corporate charter, which can differ significantly from its market value.