If the Price of Butter Increases 5 Percent and the Amount

question 59

Multiple Choice

If the price of butter increases 5 percent and the amount of margarine purchased increases 25 percent,then the cross-price elasticity of these goods is:

• A) 5.
• B) 5
• C) 0.2
• D) 0.2.

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Definitions:

Total Expenditures

The sum of all spending or costs incurred by an individual, firm, or government.

Price Elasticity of Demand

An indicator of the responsiveness of the quantity demanded of a product to changes in its price.

Movie Tickets

A form of voucher or certificate that entitles the holder to admission to a film screening.

Elastic

Describes a situation where a change in one variable, such as price, leads to a significant change in another variable, such as demand.