When Jane raises the price of haircuts by 10 percent, the quantity demanded decreases by 5 percent. The demand for haircuts is _____, and Jane's total revenue _____ as a result of the price change.

Question

Quizplus · Accepted Answer

The demand is inelastic because the percentage decrease in quantity demanded (5%) is less than the percentage increase in price (10%), indicating that consumers are relatively unresponsive to price changes in this range. Jane's total revenue increases because the higher price more than offsets the decrease in quantity sold.

When Jane Raises the Price of Haircuts by 10 Percent