-A manufacturer of ginseng tea found that when it lowered the price of a can of its product from $8 to $7,total revenue declined and when it raised the price from $8 to $9 and total sales revenue again declined.Given this information,which of the following statements is correct?
A)The demand for the product is elastic in the $7 to $8 price range.
B)The demand for the product is inelastic in the $8 to $9 price range.
C)$8 cannot be an equilibrium price for this product.
D)The demand for the product is inelastic in the $7 to $8 range.

Question

-A manufacturer of ginseng tea found that when it lowered the price of a can of its product from $8 to $7,total revenue declined and when it raised the price from $8 to $9 and total sales revenue again declined.Given this information,which of the following statements is correct?
A)The demand for the product is elastic in the $7 to $8 price range. 
B)The demand for the product is inelastic in the $8 to $9 price range. 
C)$8 cannot be an equilibrium price for this product. 
D)The demand for the product is inelastic in the $7 to $8 range.

Quizplus · Accepted Answer

When the price was lowered from $8 to $7 and total revenue declined, it indicates that the percentage decrease in price led to a smaller percentage increase in quantity demanded, which is characteristic of inelastic demand in the $7 to $8 price range.

-A Manufacturer of Ginseng Tea Found That When It Lowered