Which of the Following IS NOT a Situation That Can

question 74

Multiple Choice

Which of the following IS NOT a situation that can cause customers to be less sensitive to price increases?

• A) When customers have few product choices.
• B) When products are highly differentiated.
• C) When the product is a real or a perceived necessity.
• D) When the total expenditure is high.
• E) When the product is considered to be "worth it".

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Definitions:

Economic Efficiency

A state where every resource is optimally allocated to serve each individual or entity in the best way while minimizing waste and inefficiency.

Incentives

Incentives are rewards or penalties that motivate individuals or entities to act in a certain way, often used to influence economic behavior and decision-making.

Ability-to-pay Principle

A tax design principle that suggests taxes should be levied according to an individual's or entity's ability to bear them.

Regressive Tax

A tax imposed in such a manner that the tax rate decreases as the amount subject to taxation increases.