A Minnesota snowmobile dealer lowers its prices in February by 16 percent and the quantity demanded increases by 2 percent.Thus the demand for snowmobiles from this dealer is ________ and the dealer's total revenue will ________.
A) elastic; increase
B) elastic; decrease
C) inelastic; increase
D) inelastic; decrease
E) unit elastic; decrease

Question

Quizplus · Accepted Answer

The demand is inelastic because the percentage change in quantity demanded (2%) is less than the percentage change in price (16%), leading to a decrease in total revenue since a price reduction does not lead to a proportionally larger increase in quantity sold.

A Minnesota Snowmobile Dealer Lowers Its Prices in February by 16