Figure 5-9
-Refer to Figure 5-9.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 5-9 
-Refer to Figure 5-9.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 causes a corresponding increase in quantity demanded from 200 to 300 units. However, the percentage increase in quantity demanded (50%) is less than the percentage decrease in price (33.3%), indicating that demand is inelastic in this price range. Thus, a decrease in price results in a decrease in total revenue, which is equal to the price decrease multiplied by the quantity increase. Therefore, the decrease in total revenue is $20 (=$5 x 400 - $10 x 300), and the price elasticity of demand is less than 1 in this price range.

Figure 5-9 -Refer to Figure 5-9.A Decrease in Price from $15 to from $15