Dusty Rags, Inc.provides janitorial services to retail stores.Dusty had been charging $10 per hour and selling 400 hours of service per week at that rate.When he raised his price to $15 per hour, his customers cut back to 300 weekly hours of service.Which of the following is true?
A)Revenue went from $4, 000 per week to $4, 500 per week, indicating that the demand curve for his services must have shifted to the right.
B)Revenue went from $4, 000 per week to $4, 500 per week, indicating that the demand for his services must be elastic.
C)Revenue went from $4, 000 per week to $4, 500 per week, indicating that the demand for his services must be inelastic.
D)Revenue went from $400 to $300 per week, indicating that demand must be elastic.
E)Revenue went from $10 to $15 per week, indicating that demand must be inelastic.

Question

Quizplus · Accepted Answer

The increase in price from $10 to $15 per hour led to a decrease in quantity demanded from 400 hours to 300 hours. However, the increase in price more than offset the decrease in quantity demanded, leading to an increase in total revenue from $4,000 to $4,500 per week. This indicates that the demand for his services is inelastic, as customers are willing to pay a higher price without significantly reducing their demand for the service.