Marge tutors English students-if she raises rates, her revenues increase. Brad tutors biology students-if he lowers rates, his revenues increase. Which of the following is TRUE?
A) Marge's demand is elastic, and Brad's demand is inelastic.
B) Marge's demand is inelastic, and Brad's demand is elastic.
C) Marge's demand is elastic, and Brad's demand is elastic.
D) Marge's demand is inelastic, and Brad's demand is inelastic.

Question

Quizplus · Accepted Answer

Marge's demand for English tutoring is likely to be relatively inelastic, meaning that an increase in her price will lead to a smaller increase, or a decrease, in her revenues. This is because her service may be considered a necessity or because of her reputation and expertise. Brad's demand is likely to be relatively elastic because, as he lowers his prices, he will attract more price-sensitive students who were previously priced out of his services. This means that his revenues will increase more than proportionally to the price decrease.

Marge Tutors English Students-If She Raises Rates, Her Revenues Increase