When Dave raises the price of smart watches by 10 percent, the quantity demanded decreases by 30 percent. The demand for smart watches is _____, and Dave's total revenue _____ as a result of the price change.
A) elastic; increases
B) inelastic; decreases
C) elastic; decreases
D) inelastic; increases

Question

Quizplus · Accepted Answer

The demand is considered elastic because the percentage decrease in quantity demanded (30%) is greater than the percentage increase in price (10%), indicating sensitivity to price changes. Consequently, Dave's total revenue decreases because the loss in revenue from selling fewer units is not offset by the increase in price per unit.

When Dave Raises the Price of Smart Watches by 10