If the absolute price elasticity of demand of a good is 1.8, 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

If the absolute price elasticity of demand of a good is greater than 1, it means that demand is price elastic, and a decrease in the price will lead to a proportionally larger increase in quantity demanded. Therefore, total revenue will increase with a price decrease, and decrease with a price increase.

If the Absolute Price Elasticity of Demand of a Good