Price Elasticity of Demand

question 81

Multiple Choice

Price elasticity of demand:

• A) Is a price based on total cost with a desired mark-up
• B) Indicates the sensitivity of sales to changes in price
• C) Is a price based on variable cost with a desired mark-up
• D) Is a calculation that relates changes in costs to changes in volume of sales

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Definitions:

Inventory Cost

The total cost incurred to acquire, hold, and convert raw materials into finished goods, including costs of purchase, handling, and storage.

Sales Commissions

Payments made to sales employees as a percentage of the sales they generate, used as an incentive to drive sales.

Quantity Discounts

Price reductions offered to customers for purchasing goods or services in large quantities.

Periodic Inventory System

A method of inventory valuation for financial reporting purposes where a physical count of the inventory is taken at specific intervals.