A 25% decrease in the price of breakfast cereal leads to a 20% increase in the quantity of cereal demanded. As a result:
A)total revenue will decrease.
B)total revenue will increase.
C)total revenue will remain constant.
D)the elasticity of demand will increase.

Question

A 25% decrease in the price of breakfast cereal leads to a 20% increase in the quantity of cereal demanded. As a result:
A)​total revenue will decrease.
B)​total revenue will increase.
C)​total revenue will remain constant.
D)​the elasticity of demand will increase.

Quizplus · Accepted Answer

Total revenue, calculated as price times quantity, will decrease because the percentage decrease in price is larger than the percentage increase in quantity demanded, leading to a net decrease in total revenue.

A 25% Decrease in the Price of Breakfast Cereal Leads