If a 20 percent decrease in the price of a good leads to a 15 percent increase in the quantity demanded, then demand is ________ and total revenue will ________ as a result of the fall in price.
A) elastic; increase
B) elastic; decrease
C) inelastic; increase
D) inelastic; decrease

Question

Quizplus · Accepted Answer

The demand is inelastic because the percentage change in quantity demanded (15%) is less than the percentage change in price (20%). In such cases, total revenue decreases when the price falls.

If a 20 Percent Decrease in the Price of a Good