A-2

What does the price elasticity of demand measure? What is meant by inelastic demand? What is meant by elastic demand?

A-3

According to the economists approach to setting prices, the profit-maximizing price should depend on what two factors?

A-4

Which products should have a large markup over variable cost, a product whose demand is elastic or a product whose demand is inelastic?

A-6

What assumption does the absorption costing approach make about how consumers react to prices?