Suppose the price elasticity coefficients of demand are 1.43, 0.67, 1.11, and 0.29 for products W, X, Y, and Z, respectively. A 1 percent decrease in price will increase total revenue in the cases of
A)W and Y.
B)Y and Z.
C)X and Z.
D)Z and W.

Question

Quizplus · Accepted Answer

Products W and Y have price elasticity coefficients greater than 1 (1.43 and 1.11, respectively), indicating that they are elastic. Therefore, a 1 percent decrease in price for these products will lead to a more than proportional increase in quantity demanded, increasing total revenue.

Suppose the Price Elasticity Coefficients of Demand Are 1