An Absolute Price Elasticity of Demand Equal to 4 Indicates

question 353

Multiple Choice

An absolute price elasticity of demand equal to 4 indicates that a

• A) 4 percent increase in price leads to a 10 percent decrease in quantity demanded.
• B) 1 percent increase in price leads to a 4 percent decrease in quantity demanded.
• C) 0.4 percent decrease in price leads to a 1 percent increase in quantity demanded.
• D) 10 percent decrease in price leads to a 4 percent increase in quantity demanded.

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Definitions:

Lump Sum Tax

A tax that is a fixed amount, no matter the change in circumstance of the taxed entity, not affected by the taxpayer's income or activity level.

Outputs

Refers to the goods or services produced by a company or economy, indicative of productivity or production levels.

Discount Sources

Various origins from which price reductions can be obtained, such as coupons, sales promotions, or bulk buying.

Cost Function

A mathematical formula used to calculate the total cost of production based on the quantity of goods produced.