Figure 7-12
Refer to Figure 7-12. When price falls from $50 to $40, it can be inferred that demand between those two prices is
A) inelastic, since total revenue decreases from $8,000 to $5,000.
B) inelastic, since total revenue increases from $5,000 to $8,000.
C) elastic, since total revenue increases from $5,000 to $8,000.
D) unit elastic, since total revenue increases from $5,000 to $8,000.

Question

Figure 7-12 
Refer to Figure 7-12. When price falls from $50 to $40, it can be inferred that demand between those two prices is
A) inelastic, since total revenue decreases from $8,000 to $5,000. 
B) inelastic, since total revenue increases from $5,000 to $8,000. 
C) elastic, since total revenue increases from $5,000 to $8,000. 
D) unit elastic, since total revenue increases from $5,000 to $8,000.

Quizplus · Accepted Answer

When the price falls from $50 to $40, the total revenue increases from $5,000 to $8,000. This implies that demand is elastic, as consumers are more responsive to changes in price and are buying more at the lower price. Inelastic demand would result in a decrease in total revenue as price falls, whereas unit elastic demand would result in a proportional increase in total revenue.

Figure 7-12 Refer to Figure 7-12. When Price Falls from $50 to from $50