What Could a Firm Do If It Wanted to Know

question 113

Multiple Choice

What could a firm do if it wanted to know whether the demand for its product was elastic,unit-elastic,or inelastic?

• A) Survey competitors and ask them what they think demand elasticity is for the product.
• B) Talk to its customers.
• C) Change price a little bit and observe what happens to total revenue.
• D) Don't do anything as there is no way to find an elasticity value.

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Definitions:

Arbitrage Profit

The profit made from buying and selling identical assets in different markets or formats to take advantage of differing prices for the same asset.

Buying

The action of acquiring ownership in a security or other financial asset in the hope of generating a gain.

Selling

The process of parting with goods or services in exchange for money or other compensation.

Hedge Strategy

Investment strategies intended to reduce potential losses that may be incurred from adverse price movements in assets.