Which of the following could be the price elasticity of demand for a good for which an increase in price would decrease revenue?
A) 0
B) 0.5
C) 1
D) 1.5

Question

Quizplus · Accepted Answer

The price elasticity of demand (PED) measures the responsiveness of the quantity demanded of a good to a change in its price. If an increase in price decreases revenue, it means that the PED is greater than 1 (i.e. elastic demand). Therefore, the only choice that fits is D, with a PED of 1.5. Choices A, B, and C are all for goods with inelastic demand, where an increase in price would actually increase revenue.

Which of the Following Could Be the Price Elasticity of Demand