Sony is considering a 10 percent price reduction on its HD televisions. 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 that the demand for the HD televisions is inelastic. Therefore, a 10 percent price reduction will lead to less than a 10 percent increase in sales quantity, causing overall revenues to decrease.

Sony Is Considering a 10 Percent Price Reduction on Its