Suppose that the price elasticity of demand for coffee is 0.75. A drop in price will...
Suppose that the price elasticity of demand for coffee is 0.75. A drop in price will result in:
-
no change in total revenue.
-
an increase in total revenue.
-
a decrease in the demand for tea.
-
None of the options.
-
a decrease in total revenue.
Homework Answers
Elasticity = 0.75
which means that it is inelastic as the value is less than one.
So, when the price decreases, the demand increases by a lower percentage so that the total revenue decreases.
option(E)
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