If the Absolute Price Elasticity of Demand Is 2

question 18

Multiple Choice

If the absolute price elasticity of demand is 2.5, a 10 percent increase in the price will cause

• A) the quantity demanded to decrease by 2.5 percent.
• B) the quantity demanded to decrease by 25 percent.
• C) the quantity demanded to decrease by 4 percent.
• D) the quantity demanded to decrease by 40 percent.

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Definitions:

Confidence Interval

A range of values, derived from sample statistics, that is likely to contain the value of an unknown population parameter, with a certain degree of confidence.

Millilitres

A metric unit of volume equal to one thousandth of a liter, commonly used in liquid measurement.

Classification

The action or process of categorizing something according to shared qualities or characteristics.

Basis

In finance, the difference between the cash price and the futures price of an asset; in accounting, the initial value of an asset for tax purposes.