-If the price of Moonlight massage oil decreases from $3 to $2.50 and,as a result,total revenue of $6,000 does not change,what is the elasticity of demand?
A)0.22.
B)0.55.
C)1.
D)1.2.
E)1.67.

Question

-If the price of Moonlight massage oil decreases from $3 to $2.50 and,as a result,total revenue of $6,000 does not change,what is the elasticity of demand?
A)0.22. 
B)0.55. 
C)1. 
D)1.2. 
E)1.67.

Quizplus · Accepted Answer

The elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price. In this case, since the total revenue remains unchanged when the price decreases, it indicates that the quantity demanded has increased in such a way that it offsets the decrease in price, which is a characteristic of unitary elasticity, or an elasticity of 1.

-If the Price of Moonlight Massage Oil Decreases from $3