Question

A price change causes the quantity demanded of a good to increase by 12%, while the total revenue of that good decreases by 16%. True or False: The demand curve is elastic in this region.

Answer 1

Answer:

True

Explanation:

Demand is elastic when a change in price leads to a greater change in quantity demanded. Quanitity demanded is sensitive to changes in price.

If price is increased, quantity demanded falls and if price is decreased, quantity demanded increase.

In this question, total revenue fell despite an increase in the quantity demanded. This indicates that prices fell.

If demand were inelastic, total revenue would increase with an increase in quanitity demanded.

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