Microeconomics 42. Figure 7-13 Refer to Figure 7-13. A decrease in price from $1
ID: 1098977 • Letter: M
Question
Microeconomics
42.
Figure 7-13
Refer to Figure 7-13. A decrease in price from $15 to $10 leads to
A) a decrease in total revenue of $20, so the price elasticity of demand is less than 1 in this price range.
B) a decrease in total revenue of $10, so the price elasticity of demand is greater than 1 in this price range.
C) a decrease in total revenue of $20, so demand is elastic in this price range.
D) a decrease in total revenue of $10, so the price elasticity of demand is less than 1 in this price range.
Explanation / Answer
A) a decrease in total revenue of $20, so the price elasticity of demand is less than 1 in this price range.
revenue change =10*10-15*8
=$20
so revenue decreased by 20
and eklasticity = (10-8)/(15-10)*(15+10)/(8+10)
=0.555
as it is <1. hence inelastic
ans: A) a decrease in total revenue of $20, so the price elasticity of demand is less than 1 in this price range.