If the elasticity of demand for cigarettes by teenagers is 1.5, then the price and total revenue from teens buying cigarettes are
A) zero.
B) unrelated.
C) inversely related.
D) directly related.

Question

Quizplus · Accepted Answer

An elasticity of demand greater than 1 means that the demand is elastic, and a change in price leads to a proportionately larger change in the quantity demanded. Therefore, if the price of cigarettes goes up, teenagers will decrease their demand for cigarettes by more than the percentage increase in price. This means that the total revenue generated by sales to teenagers will decrease. On the other hand, if the price goes down, teenagers will increase their demand for cigarettes by more than the percentage decrease in price, and the total revenue generated by sales to teenagers will increase. Therefore, price and total revenue from teens buying cigarettes are inversely related.

If the Elasticity of Demand for Cigarettes by Teenagers Is