A Product's Point Price Elasticity Has Been Estimated at -1

question 46

Multiple Choice

A product's point price elasticity has been estimated at -1.5. At the initial price of $20, the quantity demanded was 10 units. If the firm cuts the price to $17.50, quantity demanded and sold is expected to increase by _____.

• A) 18.75%
• B) 6.67%
• C) 8.75%
• D) 10.33%
• E) 12.5%

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Definitions:

Wage Rates

The standardized amount of compensation paid to an employee by an employer in exchange for labor, typically measured per hour or piece of work.

Labor Costs

Represents the total expenditure by businesses for paying their employees, including wages, benefits, and taxes associated with employing labor.

Production Costs

The total expenses incurred in the process of creating and manufacturing a product or service.

Wage Rates

The standard amount of money paid for work performed, typically expressed per hour, day, or piece.