If the price elasticity of demand for computers is greater than 1, then an increase in computer prices will
A)lower total revenue.
B)raise total revenue.
C)not change total revenue.
D)either raise or lower total revenue, depending on the starting price.
E)lead to a higher percentage change in total revenue than the percentage change in price.

Question

Quizplus · Accepted Answer

When the price elasticity of demand for computers is greater than 1, it means that consumers are very responsive to changes in the price of computers. Therefore, if the price of computers increases, the quantity demanded will decrease by a greater percentage than the percentage increase in price, resulting in a decrease in total revenue. Conversely, if the price of computers decreases, the quantity demanded will increase by a greater percentage than the percentage decrease in price, resulting in an increase in total revenue.

If the Price Elasticity of Demand for Computers Is Greater