Sony is considering a 10 percent price reduction on its HD TV sets.If the price-elasticity coefficient for the sets in this price range is 0.75, then the price cut will cause
A)sales quantity to increase and revenues to also increase.
B)sales quantity to increase but revenues to decrease.
C)sales quantity to decrease and revenues to also decrease.
D)sales quantity to decrease but revenues to increase.

Question

Quizplus · Accepted Answer

The price-elasticity coefficient of 0.75 indicates inelastic demand, meaning the percentage change in quantity demanded is less than the percentage change in price. A 10% price reduction will increase sales quantity by 7.5%, leading to a decrease in total revenue.

Sony Is Considering a 10 Percent Price Reduction on Its