To answer the question,refer to the following table showing a demand schedule: If price falls from $200 to $150,
A)arrows representing the price and quantity effects both point down.
B)an arrow representing the price effect points down and is longer than an arrow for the quantity effect.
C)an arrow representing the price effect points down and is shorter than an arrow for the quantity effect.
D)arrows representing the price and quantity effects both point up.
E)total revenue moves in the same direction as the arrow representing the price effect.

Question

To answer the question,refer to the following table showing a demand schedule:  If price falls from $200 to $150,
A)arrows representing the price and quantity effects both point down. 
B)an arrow representing the price effect points down and is longer than an arrow for the quantity effect. 
C)an arrow representing the price effect points down and is shorter than an arrow for the quantity effect. 
D)arrows representing the price and quantity effects both point up. 
E)total revenue moves in the same direction as the arrow representing the price effect.

Quizplus · Accepted Answer

When the price falls from $200 to $150, the quantity demanded increases from 40 to 60 (quantity effect), and the total revenue increases from $8000 to $9000. However, the price effect (the change in revenue due to the change in price alone) is negative. This is because the increase in quantity demanded (due to the decrease in price) is not large enough to offset the decrease in price per unit. Therefore, the arrow representing the price effect points down and is shorter than the arrow for the quantity effect.

To Answer the Question,refer to the Following Table Showing a Demand