Suppose that a local dry cleaner shop faces a demand curve that is liner and that the current price for its garments is set at a point where the price elasticity of demand is 1.7.If the local dry cleaner shop increases the price per garment,demand becomes ________ elastic and total revenue ________.
A) less; decreases
B) more; decreases
C) less; increases
D) more; increases

Question

Quizplus · Accepted Answer

When the price elasticity of demand is greater than 1, demand is considered elastic, meaning consumers are relatively responsive to price changes. If the dry cleaner raises prices from this point, the demand becomes less elastic (as it moves along the demand curve towards a less responsive section), and total revenue decreases because the percentage drop in quantity demanded will be larger than the percentage increase in price.

Suppose That a Local Dry Cleaner Shop Faces a Demand