Exhibit 5-7
-Between points b and c in Exhibit 5-7, price decreases by $1, quantity demanded increases by 10,
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 5-7 
-Between points b and c in Exhibit 5-7, price decreases by $1, quantity demanded increases by 10,
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

When price decreases and quantity demanded increases, total revenue increases if demand is elastic. Here, a $1 decrease in price leads to a 10-unit increase in quantity demanded, resulting in a $40 increase in total revenue, indicating elastic demand.

Exhibit 5-7 -Between Points B and C in Exhibit 5-7, Price Decreases