Exhibit 5.4

-Refer to Exhibit 5.4,which shows a downward-sloping linear demand curve.Between points b and c price decreases by $1,quantity demanded increases by 10 units,_____
A)total revenue decreases by $1, and demand is elastic.
B)total revenue decreases by $1, and demand is inelastic.
C)total revenue increases by $40, and demand is elastic.
D)total revenue increases by $40, and demand is inelastic.
E)and total revenue increases by $80.

Question

Exhibit 5.4
 
-Refer to Exhibit 5.4,which shows a downward-sloping linear demand curve.Between points b and c price decreases by $1,quantity demanded increases by 10 units,_____
A)total revenue decreases by $1, and demand is elastic. 
B)total revenue decreases by $1, and demand is inelastic. 
C)total revenue increases by $40, and demand is elastic. 
D)total revenue increases by $40, and demand is inelastic. 
E)and total revenue increases by $80.

Quizplus · Accepted Answer

Total revenue increases because the price decrease leads to a more than proportional increase in quantity demanded, indicating elastic demand. The increase in total revenue by $40 is calculated by the increase in quantity (10 units) times the new price, minus the loss from the lower price per unit on the units sold before the price change.

Exhibit 5.4 -Refer to Exhibit 5.4,which Shows a Downward-Sloping Linear Demand Curve.Between