If the price elasticity of demand coefficient equals 2 then:
A) a 7 percent decrease in the price will result in a 14 percent decrease in the quantity demanded.
B) a price decrease will increase total revenue.
C) the good has an inelastic demand.
D) there is likely few substitutes, a short time period under consideration, or this good accounts for a relatively small percentage of consumers' budgets.

Question

Quizplus · Accepted Answer

The price elasticity of demand coefficient of 2 indicates that the demand is elastic, meaning that a percentage change in price will result in a larger percentage change in the quantity demanded. Therefore, a decrease in price will lead to an increase in total revenue, as consumers will buy significantly more of the product due to its lower price.

If the Price Elasticity of Demand Coefficient Equals 2 Then