When Nina decreases her price of lipstick from $7 to $5, she finds that her sales increase from 6 to 7. She faces demand for her product, and this price change will her total revenue.
A) elastic; raise
B) inelastic; lower
C) unitary elastic; not change
D) perfectly elastic; raise
E) perfectly inelastic; lower

Question

Quizplus · Accepted Answer

The demand is inelastic because the percentage change in quantity demanded (1/6 = 16.67%) is less than the percentage change in price (2/7 = 28.57%). When demand is inelastic, a decrease in price leads to a decrease in total revenue.

When Nina Decreases Her Price of Lipstick from $7 to $5