Figure 7-13
Refer to Figure 7-13. A decrease in price from $15 to $10 leads to
A) a decrease in total revenue of $10, so the price elasticity of demand is greater than 1 in this price range.
B) a decrease in total revenue of $10, so the price elasticity of demand is less than 1 in this price range.
C) a decrease in total revenue of $20, so the price elasticity of demand is less than 1 in this price range.
D) a decrease in total revenue of $20, so demand is elastic in this price range.

Question

Figure 7-13 
Refer to Figure 7-13. A decrease in price from $15 to $10 leads to
A) a decrease in total revenue of $10, so the price elasticity of demand is greater than 1 in this price range. 
B) a decrease in total revenue of $10, so the price elasticity of demand is less than 1 in this price range. 
C) a decrease in total revenue of $20, so the price elasticity of demand is less than 1 in this price range. 
D) a decrease in total revenue of $20, so demand is elastic in this price range.

Quizplus · Accepted Answer

A decrease in price from $15 to $10 results in a change in quantity demanded from 10 units to 20 units, which is an increase of 100%. However, the decrease in price also results in a decrease in total revenue of $20 (from $150 to $130), indicating that demand is inelastic in this price range. The price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price, which is (100%/50%) = 2. Therefore, demand is elastic when the price decreases from $15 to $10 in this price range.

Figure 7-13 Refer to Figure 7-13. a Decrease in Price from $15