Question

Good R decreases in price by 15% and as a result, sales increase by 22%,

5.1.  

What is the elasticity of demand, expressed as an absolute value? Round to 2 digits behind the decimal.

Good R decreases in price b

Good R decreases in price by 15% and as a result, sales increase by 22%,

5.2.We would describe these consumers as highly inelastic in their demand.T/F

Good R decreases in price by 15% and as a result, sales increase by 22%,

5.3.  

Consumers of good R are not very price sensitive at all.

Good R decreases in price by 15% and as a result, sales increase by 22%,

5.4.

When the price is decreased, total revenue will increase.T/F

Answer 1

Answer.)

5.1)  the elasticity of demand = % change in quantity demanded / % change in price = 22 / (-15 ) = (-1.47)

Note that absolute elasticity is 1.47 > 1 therefore , Good R's demand is price elastic.

5.2) FALSE

Note that absolute elasticity is 1.47 > 1 therefore , Good R's demand is price elastic.

5.3) FALSE

Note that absolute elasticity is 1.47 > 1 therefore , Good R's demand is price elastic.

5.4.) TRUE.

Accroding to total outlay method of elasticity, if demand is elsatic then decrease in price will lead to increase in total revenue.