If the absolute price elasticity of demand of a good is 1.46, then the total revenues will increase if its market price
A) increases.
B) decreases.
C) stays the same.
D) changes, but we can't tell without more information if the price increases or decreases.

Question

Quizplus · Accepted Answer

When the absolute price elasticity of demand is greater than 1, it means that demand is highly responsive to changes in price, and therefore, when price decreases, the quantity demanded will increase by a larger percentage, leading to a larger increase in total revenue. Conversely, if the price increases, the quantity demanded will decrease by a larger percentage, leading to a larger decrease in total revenue. Since the absolute price elasticity of demand is 1.46, a decrease in price will lead to an increase in total revenue.

If the Absolute Price Elasticity of Demand of a Good