If Pete raises the price of his muffins from $2 to $3 and his sales revenue increases from $35 000 to $38 000, then:
A) the demand for Pete's muffins in this range is price elastic.
B) the demand for Pete's muffins in this range is price inelastic.
C) the demand for Pete's muffins in this range is unit elastic.
D) the percentage change in quantity demanded must exceed the percentage change in product price.

Question

Quizplus · Accepted Answer

If the increase in price leads to an increase in revenue, it suggests that the demand for Pete's muffins is inelastic in the given price range. If demand were elastic, the increase in price would lead to a decrease in revenue, as the increase in price would cause a significant decrease in demand.

If Pete Raises the Price of His Muffins from $2