CFA Practice Question

There are 539 practice questions for this study session.

CFA Practice Question

In which of the following cases will the total expenditures on a product increase?
A. Market price falls and demand elasticity is -0.7.
B. Market price falls and demand elasticity is -1.7.
C. Market price increases and demand elasticity is -1.3.
Explanation: Total expenditure rises when a price decrease occurs in the market for an elastic good. An elastic good under a price decrease is represented by the good with a price elasticity coefficient greater than one, or -1.7.

User Contributed Comments 5

User Comment
labsbamb demand elasticity < 1 : DEMAND INELASTIC
Why talking about elastic goods?
charlie It is an elastic since |demand elasticity| > 1, although the demand elasticity is less than 1.
dizzel Review the ELASTICITY CONCEPTS!!!
eb2568 Will -1.3 not also cause it to increase as well?? I don't think the question asks which will make expenditures increase the most!
eb2568 oh wait, nevermind. i guess i need to READ THE ANSWERS MORE CAREFULLY!!
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