If a product has an elastic demand, then we can expect
A) total revenue to rise if price falls.
B) a price increase to increase total revenue.
C) a smaller percentage change in the quantity demanded given some percentage change in the price.
D) the absolute value of the elasticity of demand coefficient to be less than 1.
E) that there are few substitutes for this product.

Question

Quizplus · Accepted Answer

An elastic demand means that the quantity demanded is highly responsive to changes in price. Therefore, if the price of the product falls, we can expect the percentage change in quantity demanded to be larger than the percentage change in price, leading to an increase in total revenue. Conversely, if the price increases, the percentage change in quantity demanded will be larger than the percentage change in price, leading to a decrease in total revenue.

If a Product Has an Elastic Demand, Then We Can