The marketing people for AT&T believe that if they lower the price of long-distance phone calls by 5 percent, their quantity demanded will increase by 15 percent. If they are correct in their belief, then
A) the demand for long-distance phone calls is price inelastic.
B) the total revenue from long-distance phone calls will increase if they lower the price.
C) the demand for long-distance phone calls is income elastic.
D) the total revenue from long-distance phone calls will decrease if they lower the price.

Question

Quizplus · Accepted Answer

If the quantity demanded increases by a greater percentage than the price decreases, the demand is price elastic, leading to an increase in total revenue when the price is lowered.

The Marketing People for AT&T Believe That If They Lower