Which of the following could be the price elasticity of demand for a good for which a decrease in price would increase total revenue?
A)0.9
B)0.0
C)1
D)2.5

Question

Quizplus · Accepted Answer

The price elasticity of demand measures how much the quantity demanded of a good responds to a change in its price. If the elasticity is greater than 1 (elastic), a decrease in price will increase total revenue because the percentage increase in quantity demanded is greater than the percentage decrease in price. Thus, an elasticity of 2.5 means the demand is elastic, and a decrease in price would increase total revenue.

Which of the Following Could Be the Price Elasticity of Demand