In examining the concept of price elasticity of demand, it is seen that if:
A) price and quantity change in the opposite direction, then demand is price elastic.
B) price and total revenue change in the opposite direction, then demand is price inelastic.
C) price and total revenue change in the opposite direction, then demand is price elastic.
D) price and total revenue change in the same direction, then demand is price elastic.

Question

Quizplus · Accepted Answer

Price elasticity of demand refers to the responsiveness of quantity demanded to a change in price. If a slight change in price leads to a large change in the quantity demanded, demand is said to be elastic. In this case, as price and total revenue change in the opposite direction, demand is said to be price elastic. This is because when the price is raised, the quantity demanded decreases by a large amount, causing the total revenue to fall. On the other hand, if a change in price leads to a small change in the quantity demanded, demand is said to be inelastic. Therefore, option C is the correct answer.

In Examining the Concept of Price Elasticity of Demand, It