Question

Pepsi vendors who raise their price at professional sporting events increase total revenue because the price elasticity of demand is ________. When they raise their prices at gas stations, they decrease total revenue because the price elasticity of demand is ________.

Answer 1

Pepsi vendors who raise their prices at professional sporting events increase total revenue because the price elasticity of demand is inelastic. When they raise their prices at gas stations, they decrease total revenue because the price elasticity of demand is elastic.

Elastic demand or elastic supply is one in which the elasticity is greater than one, indicating high responsiveness to changes in price. Elasticities that are less than one indicate low responsiveness to price changes and correspond to inelastic demand or inelastic supply.