A union argues that a price cut will boost the revenues of the firm, while management argues that the opposite is true. This suggests that the price elasticity of demand is
A) unit-elastic from the union's perspective and unit-inelastic from management's perspective.
B) perfectly inelastic from the union's perspective and perfectly elastic from management's perspective.
C) elastic from the union's perspective, inelastic from management's perspective.
D) inelastic from the union's perspective, elastic from management's perspective.

Question

Quizplus · Accepted Answer

The union believes a price cut will increase revenue, indicating demand is elastic (quantity demanded increases more than the price decrease). Management believes revenue will decrease, indicating demand is inelastic (quantity demanded increases less than the price decrease).

A Union Argues That a Price Cut Will Boost the Revenues