The elasticity in the vicinity of five different points along a demand curve varies as follows: $\begin{array}{lcccc}
\text { Point } & \text { A } & \text { B } & \text { C } & \text { D }&\text {E} \
\text { Elasticity } & 1.25 & 0.3 & 1.0 & 0.2&2.1
\end{array}$ In the vicinity of which of these points would a price decrease be accompanied by an increase in total revenue?
A)B and D
B)A and E
C)A and D
D)B, C, and D

Question

The elasticity in the vicinity of five different points along a demand curve varies as follows: $\begin{array}{lcccc}
\text { Point } & \text { A } & \text { B } & \text { C } & \text { D }&\text {E} \
\text { Elasticity } & 1.25 & 0.3 & 1.0 & 0.2&2.1
\end{array}$  In the vicinity of which of these points would a price decrease be accompanied by an increase in total revenue?
A)B and D
B)A and E
C)A and D
D)B, C, and D

Quizplus · Accepted Answer

A price decrease will increase total revenue when demand is elastic (elasticity > 1). Points A and E have elasticities greater than 1, indicating elastic demand.

The Elasticity in the Vicinity of Five Different Points Along