In California, the price elasticity for vanity license plates is .5 and their price is $78. California is:
A) maximizing revenue since elasticity is less than 1 and revenue will increase after a price increase when demand is inelastic.
B) not maximizing revenue since elasticity is less than 1 and revenue will increase after a price increase when demand is inelastic.
C) maximizing revenue since elasticity is less than 1 and revenue will decrease after a price increase when demand is inelastic.
D) not maximizing revenue since elasticity is less than 1 and revenue will decrease after a price increase when demand is inelastic.

Question

Quizplus · Accepted Answer

When demand is inelastic (elasticity < 1), increasing the price will increase total revenue, indicating that California is not maximizing revenue at the current price.

In California, the Price Elasticity for Vanity License Plates Is