Because of an increase in the price of leather, the price of a pair of women's dress shoes increased 12 percent. If the price elasticity of demand for women's dress shoes is 0.85, which of the following will happen?
A) Total expenditure on women's dress shoes decreases.
B) The number of pairs of women's dress shoes demanded decreases by 10.2 percent.
C) Total revenue from the sale of women's dress shoes decreases.
D) none of the above

Question

Quizplus · Accepted Answer

The price elasticity of demand is 0.85, which means that for a 1% increase in price, the quantity demanded decreases by 0.85%. Therefore, a 12% increase in price will lead to a 10.2% decrease in quantity demanded (12% * 0.85 = 10.2%).

Because of an Increase in the Price of Leather, the Price