IFoA CB2 Practice Questions - IFoA Subject CB2 Business Economics Exam

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The price elasticity of demand for a product is measured as -0.4. A firm raises the price by 10%. What is the approximate effect on quantity demanded and total revenue?

Quantity rises 4%; total revenue rises Quantity falls 4%; total revenue rises Quantity falls 4%; total revenue falls Quantity falls 25%; total revenue falls

Correct Answer:

Quantity falls 4%; total revenue rises

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