Holding all other things constant,if the price elasticity of demand increases (i.e. ,becomes more negative),then the markup under absorption costing will:
A)increase.
B)decrease.
C)remain the same.
D)The effect cannot be determined.

Question

Quizplus · Accepted Answer

If the price elasticity of demand increases, meaning that the quantity demanded is more sensitive to changes in price, the producer will have less pricing power and may not be able to pass on the full cost of production to consumers. As a result, the profit margin per unit will decrease under absorption costing, leading to a decrease in the markup.

Holding All Other Things Constant,if the Price Elasticity of Demand