The price elasticity of demand for gasoline is 0.40. If the price of gasoline rises by 20 percent, there will be
A) a decrease of more than 20 percent in the quantity of gasoline demanded.
B) an increase in the total revenue received from the sale of gasoline.
C) a loss of total revenue for gasoline producers, because at a higher price the quantity of gasoline demanded decreases.
D) no change in the quantity of gasoline sold because people need gasoline.

Question

Quizplus · Accepted Answer

The price elasticity of demand of 0.40 indicates that demand is inelastic. When the price increases, total revenue increases because the percentage decrease in quantity demanded is less than the percentage increase in price.

The Price Elasticity of Demand for Gasoline Is 0