If the price of a product increases by 10 percent and the quantity demanded decreases by 15 percent, then the
A)product has an elastic demand.
B)product has an inelastic demand.
C)product has an elastic supply.
D)product has a unit-elastic demand.
E)producer should raise the price further to increase total revenue.

Question

Quizplus · Accepted Answer

When the price of a product increases by 10 percent and the quantity demanded decreases by 15 percent, it indicates that the product has an elastic demand. This means that the change in price has a relatively larger effect on the quantity demanded. If the product had an inelastic demand, the quantity demanded would have decreased by a smaller percentage. Therefore, option A is the correct choice. Option B, C, and D are ruled out. Option E is also incorrect because raising the price further will lead to a further decrease in the quantity demanded and, therefore, lower total revenue.

If the Price of a Product Increases by 10 Percent