If the total revenue of producers rises for an initial cut in the price of their product but falls for further reductions in price,the price elasticity of demand for the product
A)declines as price falls.
B)is zero.
C)is unity.
D)rises as price falls.
E)rises and then falls.

Question

Quizplus · Accepted Answer

The price elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in price. If the total revenue of producers rises for an initial cut in the price of their product but falls for further reductions in price, then the price elasticity of demand is less than 1. This is because the initial cut in price leads to a greater percentage increase in quantity demanded than the percentage decrease in price, while the further reductions in price lead to a smaller percentage increase in quantity demanded than the percentage decrease in price.

If the Total Revenue of Producers Rises for an Initial