With Elastic Demand

question 25

Multiple Choice

With elastic demand:

• A) a given percentage increase in price causes quantity to decrease by a larger percentage.
• B) |e_P| > 1 and the relative change in quantity is smaller than the relative change in price.
• C) a price increase raises total revenue
• D) A price decrease causes total revenues to fall.

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Definitions:

Absolute Values

The non-negative value of a number regardless of its sign; it represents the distance of a number on the number line from zero.

Multiply

To increase a quantity by another quantity, a basic mathematical operation involving the addition of a number to itself a specified number of times.

Intercept

In the context of regression models, it refers to the value of the dependent variable when all independent variables are zero.