Homework Answers
Ans: D ) 0.50; increase
The price elasticity of demand is 0.50 . A price rise will increase total revenue.
Explanation:
Price elasticity of demand ( Ed ) = % Change in quantity demanded / % Change in price
Ed = 4 / 8 = 0.50
When demand is inelastic , then increase in price will lead an increase in total revenue . But when demand is inelastic , then decrease in price will lead a decrease in total revenue.
Ans: A ) bread
Explanation:
An example of a good with such a demand is bread. It is a necessity good. The price elasticity of demand for this good is inelastic in nature.
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