Economic or pure profit is calculated by subtracting:
a. explicit costs from revenue
b. implicit costs from revenue
c. implicit costs from normal profit
d. explicit and implicit costs from revenue
Income elasticity measures how sensitive purchases of a specific product are to changes in:
a. the price of other products
b. the price of the same product
d. the general price level
Economic Profit and Income Elasticty
There are two measures of profit: economic profit and accounting profit. The economic profit equals total revenue minus the summation of implicit and explicit costs while the accounting profit equals total revenue minus explicit costs.
Income elasticity measures the sensitivity of the quantity demanded with respect to income changes.
Answer and Explanation:
Q1 (D) is true.
Economic profit equals total revenue minus the summation of explicit and implicit costs. In other words, despite accounting profit, the economic profits account for nonmonetary costs such as time cost, the opportunity cost of using your own building and saving, etc.
Q2 (C) is true.
Income elasticity measures the percentage changes in quantity demanded with respect to percentage changes in income.
Learn more about this topic:
from Economics 101: Principles of MicroeconomicsChapter 2 / Lesson 13
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