A 15 percent increase in the price of beef reduces the quantity of beef consumed by 30 percent. Thus, the demand for beef is ____, and total consumer expenditure (or total firm revenue) will ____ as a result of the price increase. (Fill in the blanks.)
A) elastic; increase
B) elastic; decrease
C) inelastic; increase
D) inelastic; decrease

Question

Quizplus · Accepted Answer

This is an example of elastic demand because the percentage decrease in quantity demanded is greater than the percentage increase in price. When demand is elastic, an increase in price leads to a decrease in total consumer expenditure or total firm revenue because the decrease in quantity demanded outweighs the increase in price. Therefore, total consumer expenditure will decrease in this scenario.

A 15 Percent Increase in the Price of Beef Reduces