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2 years ago

True or False: The value of the price elasticity of demand is equal to the slope of the demand curve. True False

Business

1 answer:

kozerog [31]2 years ago

5 0

Answer:

false

Explanation:

Price elasticity of demand measures the responsiveness of quantity demanded to changes in price of the good.

Price elasticity of demand = percentage change in quantity demanded / percentage change in price

If the absolute value of price elasticity is greater than one, it means demand is elastic. Elastic demand means that quantity demanded is sensitive to price changes.

Demand is inelastic if a small change in price has little or no effect on quantity demanded. The absolute value of elasticity would be less than one

Demand is unit elastic if a small change in price has an equal and proportionate effect on quantity demanded.

The elasticity of demand is inversely related to the slope. The higher the value of elasticity of demand, the lower the slope and vice verse

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One year ago Lerner and Luckmann Co. issued 15-year, noncallable, 7.5% annual coupon bonds at their par value of $1,000. Today,

Dennis_Churaev [7]

Answer:

current price = $1191.79

Explanation:

given data

time t = 15 year

annual coupon bonds rate = = 7.5 %

par value = $1000

interest rate = 5.5%

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to find out

current price of the bonds

solution

we get here first annual coupon rate = 7.5% of 1000

annual coupon rate C = $75

so now we get current price of bond

current price of the bonds = $\frac{C}{(1+r)} +\frac{C}{(1+r)^2} +\frac{C}{(1+r)^3} +\frac{C}{(1+r)^4} ..........\frac{C}{(1+r)^{13}} + \frac{C+par\ value}{(1+r)^{14}}$ .................1

put here value

current price = $\frac{75}{(1+r)} +\frac{75}{(1+r)^2} +\frac{75}{(1+r)^3} +\frac{75}{(1+r)^4} ..........\frac{75}{(1+r)^{13}} + \frac{75+1000}{(1+r)^{14}}$

current price = $\frac{75}{(1+r)} \frac{1-(\frac{1}{1+r})^{14} }{r} (1+r) + \frac{1000}{(1+r)^{14}}$

solve it we get

current price = $1191.79

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