If as a result of a 5 per cent rise in price demand falls by 10 per cent, which of the following statements is correct? Please select all that apply.
A) The price elasticity of demand is elastic
B) The price elasticity of demand is −2
C) The revenue for the firm will fall
D) It is likely that the firm is operating in an uncompetitive market

Question

Quizplus · Accepted Answer

The price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price, which is -10%/5% = -2, indicating elastic demand. With elastic demand, a price increase leads to a decrease in total revenue.

If as a Result of a 5 Per Cent Rise