A 15% increase in the price of cookies results in a 9% decrease in the quantity of cookies sold. The revenue received by cookie suppliers will because the price elasticity of demand for cookies is .
A) decrease; inelastic
B) increase; elastic
C) decrease; elastic
D) not change; unitary elastic
E) increase; inelastic

Question

Quizplus · Accepted Answer

The price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price. Here, it is -9%/15% = -0.6, which is inelastic (less than 1 in absolute value). When demand is inelastic, an increase in price leads to an increase in total revenue.

A 15% Increase in the Price of Cookies Results in a 9