If the short run elasticity of demand for widgets is 0.4 and the long run elasticity of demand for widgets is 0.95, an increase in price will ____ total revenue in the short run and ____ total revenue in the long run.
A)Increase; increase.
B)Increase; decrease.
C)Decrease; increase.
D)Decrease; decrease.

Question

If the short run elasticity of demand for widgets is 0.4 and the long run elasticity of demand for widgets is 0.95, an increase in price will ____ total revenue in the short run and ____ total revenue in the long run.
A)​Increase; increase.
B)​Increase; decrease.
C)​Decrease; increase.
D)​Decrease; decrease.

Quizplus · Accepted Answer

The short-run elasticity of demand is less than 1, so an increase in price will increase total revenue. The long-run elasticity of demand is greater than 1, so an increase in price will decrease total revenue.

If the Short Run Elasticity of Demand for Widgets Is