If the short run elasticity of demand for widgets is 1.1 and the long run elasticity of demand for widgets is 3.6, a decrease 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 1.1 and the long run elasticity of demand for widgets is 3.6, a decrease 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

In the short run, with an elasticity greater than 1 (elastic), a decrease in price leads to a proportionally larger increase in quantity demanded, thus increasing total revenue. In the long run, with an even higher elasticity of 3.6, the effect is more pronounced, leading to a further increase in total revenue as demand responds even more to price changes.

If the Short Run Elasticity of Demand for Widgets Is