The owner of a pizza shop observes that when she raises the price of a large pizza, her total revenue decreases, and when she lowers the price of a large pizza, her total revenue increases. This suggests that:
A)pizza lovers act irrationally.
B)the demand for her large pizzas is elastic with respect to price.
C)there are few good substitutes for a large pizza.
D)the demand for her large pizzas is inelastic with respect to price.

Question

Quizplus · Accepted Answer

If demand is elastic, then total revenue will decrease when price increases, and total revenue will increase when price decreases.

The Owner of a Pizza Shop Observes That When She