Question

Which of the following is TRUE regarding price elasticity?

a. When demand is inelastic, sellers should lower prices in order to increase total revenue.

b.Price elasticity does not depend on magnitude and direction of the contemplated price change.

c.The higher the elasticity, the lesser the volume growth resulting from a one-percent price reduction.

d.If demand is elastic, sellers assume that lowering the price will decrease total revenue.

e.Long-run and short-run price elasticity may differ, delaying the impact of a price change.

Answer 1

The answer is E-) Long-run and short-run price elasticity may differ, delaying the impact of a price change..

Because a price elasticity of demand, means price has a inverse relationship with quantity demanded. Thus a change in price will lead to decrease or increase in quantity demanded. All other options except e are false. And we know that, short run and long run effects are different for every product in the market. Therefore price elasticity may differ for short run and long run.