Which of the following is true regarding price elasticity?
A) The higher the elasticity, the lesser is the volume growth resulting from a 1 percent price reduction.
B) Within the price indifference band, price changes have little or no effect on demand.
C) If demand is elastic, sellers will consider increasing the price.
D) Price elasticity does not depend on magnitude and direction of the contemplated price change.
E) When demand is inelastic, sellers should lower prices in order to increase total revenue.

Question

Quizplus · Accepted Answer

Within the price indifference band, price changes have little or no effect on demand. This is because consumers are indifferent to small changes in price within a certain range, and their buying behavior remains relatively constant. The other options are incorrect: A is opposite to the correct statement, C is incorrect because if demand is elastic, then increasing the price would actually decrease total revenue. D is incorrect because price elasticity does depend on the magnitude and direction of the price change. E is incorrect because when demand is inelastic, sellers can increase total revenue by raising prices rather than lowering them.

Which of the Following Is True Regarding Price Elasticity