The marketing people at Ben and Jerry's Ice Cream Company believe that if they lower the price of their Cherry Garcia flavor ice cream by 25 percent, the quantity demanded will increase by 5 percent. If they are correct in their belief, then
A) the demand for Cherry Garcia is price elastic.
B) their total revenue from Cherry Garcia will increase if they lower the price.
C) the demand for Cherry Garcia is income elastic.
D) their total revenue from Cherry Garcia will decrease if they lower the price.

Question

Quizplus · Accepted Answer

The demand is price inelastic because the percentage change in quantity demanded (5%) is less than the percentage change in price (25%). When demand is inelastic, lowering the price decreases total revenue.

The Marketing People at Ben and Jerry's Ice Cream Company