Avital and Joshua each have their own business selling lemonade in front of their houses. When they each charge 25 cents per glass, their total revenues are equal. However, when they each charge 40 cents per glass, Avital's revenues are bigger than Joshua's revenues. This is because:
A) Joshua faces a more inelastic demand curve.
B) Avital faces a more elastic demand curve.
C) Joshua faces a more elastic demand curve.
D) Avital faces a less inelastic demand curve.

Question

Quizplus · Accepted Answer

When Avital's revenues increase more than Joshua's as the price increases, it indicates that Joshua's demand decreases more sharply with price increases, meaning his demand is more elastic. Elastic demand means consumers are more sensitive to price changes.

Avital and Joshua Each Have Their Own Business Selling Lemonade