Chuck has a price elasticity of demand for beer of 1.2. Suppose that the price of beer is increased by 10 percent. What will happen to the total amount Chuck spends on beer?
A) It will not change.
B) It will decrease.
C) It will increase.
D) It is impossible to tell.

Question

Quizplus · Accepted Answer

Since Chuck's price elasticity of demand for beer is greater than 1 (elastic), a 10% increase in price will lead to a more than 10% decrease in quantity demanded, thus reducing the total amount spent on beer.

Chuck Has a Price Elasticity of Demand for Beer of 1.2