If the price elasticity of demand for canned soup is estimated at -1.62.What happens to sales revenue if the price of canned soup rises?
A)It falls by 162 percent.
B)It rises by 1.62 percent.
C)It falls.
D)It rises.

Question

Quizplus · Accepted Answer

A price elasticity of demand of -1.62 suggests that for every 1% increase in the price of canned soup, the quantity demanded for this good will fall by 1.62%. This means that a price increase would lead to a decrease in sales revenue as consumers are not willing to purchase as much soup at the higher price. Therefore, sales revenue would fall.

If the Price Elasticity of Demand for Canned Soup Is