A 10 percent decrease in the price of energy bars leads to a 20 percent increase in the quantity of energy bars demanded. What can we conclude from this information?
A) Demand is elastic and total revenue will increase.
B) Demand is inelastic and total revenue will increase.
C) Demand is inelastic and total revenue will decrease.
D) Demand is unit elastic and total revenue will remain constant.

Question

Quizplus · Accepted Answer

A 10 percent decrease in price leads to a greater than proportional increase in quantity demanded (20 percent), showing that demand is elastic. Since the price drop leads to a significant increase in quantity demanded, total revenue will increase (price x quantity).

A 10 Percent Decrease in the Price of Energy Bars