Suppose that local dry cleaner shop faces a demand curve that is liner and that the current price for its garments is set at a point where the price elasticity is 1.7.If the local dry cleaner shop increases the price per garment:
A)the demand becomes less elastic and the total revenue decreases.
B)the demand becomes more elastic and the total revenue decreases.
C)the demand becomes less elastic and the total revenue increases.
D)the demand becomes more elastic and the total revenue increases.

Question

Quizplus · Accepted Answer

The question states that the current price elasticity is 1.7, which means that the demand is relatively elastic. If the dry cleaner increases the price per garment, the demand will become even more elastic, meaning that consumers will be more price-sensitive and will be less likely to purchase garments from the dry cleaner. This will lead to a decrease in total revenue for the dry cleaner. Therefore, the best choice is B.

Suppose That Local Dry Cleaner Shop Faces a Demand Curve