Other Things Being Equal, Demand Is Less Elastic

question 358

Multiple Choice

Other things being equal, demand is less elastic

• A) the more expensive the good is.
• B) the smaller the percentage of a total budget that a family spends on a good.
• C) the longer is the time period for adjustment.
• D) the more substitutes a good has.

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Definitions:

Contribution Margin

The amount remaining from sales revenue after variable production costs and variable expenses have been deducted; used to cover fixed costs and to generate profit.

Traceable Fixed Expenses

Fixed costs that can be directly linked to a specific business segment, product, or operation and would disappear if the segment was discontinued.

Common Fixed Expenses

Fixed costs that are not directly attributable to a specific product or service line and must be paid regardless of the level of production or sales.

Contribution Margin

The amount remaining from sales revenue after variable costs have been deducted, indicating how much revenue contributes to covering fixed costs.