If the price elasticity of demand for petrol equals 0.3, then an increase in the price of a litre of petrol from $3.70 to $3.90
A) leads to no change in total revenue.
B) makes the demand for petrol elastic.
C) increases total revenue.
D) decreases total revenue.
E) Both answers B and D are correct.

Question

Quizplus · Accepted Answer

The price elasticity of demand for petrol is 0.3, which means it is inelastic (less than 1). When the price of an inelastic good increases, total revenue increases because the percentage decrease in quantity demanded is less than the percentage increase in price.

If the Price Elasticity of Demand for Petrol Equals 0