If a 2 percent rise in price leads to a 4 percent decrease in quantity demanded, then demand is
A)elastic and total revenue decreases.
B)elastic and total revenue increases.
C)inelastic and total revenue decreases.
D)elastic, but we cannot tell what happens to total revenue without more information.
E)total revenue decreases but we cannot tell if the demand is elastic or inelastic without more information.

Question

Quizplus · Accepted Answer

When a 2 percent increase in price causes a 4 percent decrease in quantity demanded, demand is considered elastic. Elastic demand means that the percentage change in quantity demanded is greater than the percentage change in price. Additionally, since a price increase leads to a decrease in total revenue (Price x Quantity), we know that demand is not unit elastic (where the percentage change in price and quantity demanded is the same and total revenue remains constant) and total revenue decreases.

If a 2 Percent Rise in Price Leads to a 4