Products X,Y,and Z have price elasticities of 3.0,0.80,and 1.0 respectively.Total revenue decreases if the price of
A) product X falls.
B) product Y falls.
C) product Z falls.
D) product X or product Z falls.
E) product Y or product Z falls.

Question

Quizplus · Accepted Answer

Product Y has a price elasticity of 0.80, which means that a 1% decrease in price will result in a 0.8% increase in quantity demanded. This indicates that the product Y is inelastic or less sensitive to price changes. Therefore, if the price of product Y falls, the quantity demanded will increase, resulting in an increase in total revenue.

Products X,Y,and Z Have Price Elasticities of 3