If a car dealership decides to offer a rebate to reduce the selling price of its cars and as a result finds an increase in its total revenues,then the demand for cars from this dealership is
A)price elastic.
B)price inelastic.
C)rebate inelastic.
D)unit elastic.
E)unknown.

Question

Quizplus · Accepted Answer

When demand is price elastic, a decrease in price leads to a proportionally larger increase in quantity demanded, which can result in an increase in total revenue. This is the case with the car dealership's experience after offering a rebate.

If a Car Dealership Decides to Offer a Rebate to Reduce