If the Demand for a Good Is Perfectly Elastic, the Price

question 64

Multiple Choice

If the demand for a good is perfectly elastic, the price elasticity of demand is equal to _____ and the demand curve is _____.

• A)zero; downward sloping
• B)infinity; horizontal
• C)three; upward sloping
• D)two; kinked
• E)one; vertical

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Definitions:

Variable Expenses

Expenses that fluctuate in direct proportion to the amount of production or the volume of sales, including items like direct labor and raw materials.

Contribution Margin

The amount by which the sale of a product exceeds its variable costs, contributing to covering fixed costs and generating profit.

Break-Even

The point at which total costs and total revenues are equal, meaning no net loss or gain, and the business is just covering all its expenses.

Fixed Expenses

Costs that remain constant for a given period regardless of the level of production or sales volume.