If the price elasticity of demand for apples is 0.6, then a 5.0% increase in the
ID: 1139345 • Letter: I
Question
If the price elasticity of demand for apples is 0.6, then a 5.0% increase in the price of apples will decrease the quantity demanded of apples by
Question 12 options:
3.0%, and apples sellers' total revenue will increase as a result.
1.8%, and apples sellers' total revenue will increase as a result.
1.8%, and apples sellers' total revenue will decrease as a result.
1.6%, and apples sellers' total revenue will decrease as a result.
1.6%, and apples sellers' total revenue will increase as a result.
2.4%, and apples sellers' total revenue will decrease as a result.
3.0%, and apples sellers' total revenue will decrease as a result.
3.0%, and apples sellers' total revenue will increase as a result.
1.8%, and apples sellers' total revenue will increase as a result.
1.8%, and apples sellers' total revenue will decrease as a result.
1.6%, and apples sellers' total revenue will decrease as a result.
1.6%, and apples sellers' total revenue will increase as a result.
2.4%, and apples sellers' total revenue will decrease as a result.
3.0%, and apples sellers' total revenue will decrease as a result.
Explanation / Answer
As the price elasticity is below 1, the demand is inelastic that means an increase in the price of the good will affect the revenue less than the increase in the price.
0.6 = x / 5
x = 0.6 x 5
x = 3.
So, increase in the price of apples by 5% will decrease the demand by 3%, the revenue will decrease as the result but not equal to the increase in the price.
The answer is "G", Last statement.