If the price elasticity of demand for gasoline equals 0.3,then an increase in the price of a gallon of gasoline from $3.70 to $3.90
A) decreases total revenue.
B) increases total revenue.
C) leads to no change in total revenue.
D) makes the demand for gasoline elastic.
E) Both answers B and D are correct.

Question

Quizplus · Accepted Answer

Since the price elasticity of demand for gasoline is 0.3, which is less than 1, the demand is inelastic. This means that a price increase will lead to a smaller percentage decrease in quantity demanded, thus increasing total revenue.

If the Price Elasticity of Demand for Gasoline Equals 0