Suppose we observe that a firm's total revenue doesn't change when price and quantity change by the same percentage. Which of the following is a possible value of its price elasticity of demand?
A) 0
B) 0.5
C) 1
D) 2

Question

Quizplus · Accepted Answer

When the total revenue of a firm remains constant when the price and quantity change by the same percentage, it is an indication that the elasticity of demand is unitary or equal to 1. This means that the percentage change in the quantity demanded is equal to the percentage change in price, resulting in a constant total revenue. Therefore, the answer is C) 1.

Suppose We Observe That a Firm's Total Revenue Doesn't Change