You raised the price of your good by 40% and the quantity demanded declined by 20%. Demand is:

Question

Quizplus · Accepted Answer

The fact that a 40% increase in price led to a 20% decline in quantity demanded indicates that demand is inelastic. If demand were elastic, a smaller increase in price would yield a larger decline in quantity demanded. Given that demand is inelastic, a decline in price would yield a smaller increase in quantity demanded, which would not be enough to offset the revenue lost from the lower price. Therefore, a decline in price would lead to a total revenue decrease.

You Raised the Price of Your Good by 40% and the Quantity