Figure 5-6

-Refer to Figure 5-6.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 5-6
 
-Refer to Figure 5-6.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 leads to a decrease in total revenue from $150 to $130 ($10 x 13 units sold = $130). Since the decrease in total revenue is proportionately larger than the decrease in price (20% versus 33.3%), demand is relatively inelastic in this price range. Therefore, the correct choice is C, which indicates a decrease in total revenue of $20 and a price elasticity of demand less than 1 in this price range.

Figure 5-6 -Refer to Figure 5-6.A Decrease in Price from $15 to Price