If the price elasticity of demand for tuna is 0.7,then a 1.5% increase in the price of tuna will decrease the quantity demanded of tuna by
A) 1.05%, and tuna sellers' total revenue will increase as a result.
B) 1.05%, and tuna sellers' total revenue will decrease as a result.
C) 2.14%, and tuna sellers' total revenue will increase as a result.
D) 2.14%, and tuna sellers' total revenue will decrease as a result.

Question

Quizplus · Accepted Answer

The price elasticity of demand is 0.7, meaning a 1% increase in price leads to a 0.7% decrease in quantity demanded. A 1.5% price increase results in a 1.05% decrease in quantity demanded (0.7 * 1.5). Since demand is inelastic (elasticity < 1), total revenue increases when price increases.

If the Price Elasticity of Demand for Tuna Is 0