A firm's price elasticity (expressed as a positive number) for a major product is 0.3. If it reduces the product's price, total revenue will
A) increase by 30 percent.
B) increase by 70 percent.
C) decline by 30 percent.
D) decline by 70 percent.

Question

Quizplus · Accepted Answer

Since the price elasticity of demand is less than 1 (inelastic), reducing the price will lead to a smaller percentage increase in quantity demanded, resulting in a decrease in total revenue.

A Firm's Price Elasticity (Expressed as a Positive Number) for a Major