The Price Elasticity of Demand for a Certain Agricultural Product

question 24

Multiple Choice

The price elasticity of demand for a certain agricultural product is constant (over the relevant range of prices) and equal to -2.The supply elasticity for this product is constant and equal to 3.Originally the equilibrium price of this good was $45 per unit.Then it was discovered that consumption of this product was unhealthy.The quantity that would be demanded at any price fell by 100%.The percent change in the long-run equilibrium consumption of this good was

• A)-100%.
• B)-64%.
• C)-20%.
• D)-60%.
• E)There is not enough information to determine the answer.

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Definitions:

Net Working Capital

The variance between a business's current holdings and outstanding debts, signifying the entity's short-term economic condition and operational competence.

CCA Rate

The Capital Cost Allowance rate, which determines the percentage of an asset's cost that can be claimed as depreciation for tax purposes in Canada.

CCA

Capital Cost Allowance; a tax deduction in Canada for the depreciation of tangible property.

Earnings Before Interest And Taxes

A measure of a firm's profit that includes all income and expenses except interest and income tax expenses.