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Suppose the price elasticity of demand for contraceptive pills is 0.30. If there is an 10...

Suppose the price elasticity of demand for contraceptive pills is 0.30. If there is an 10 % increase in the price contraceptive pills, what is the effect on the demand for this medication and total revenues?

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Answer #1

Answer :

Quantity demanded decrease by 3%.

Total revenue will increase.

Explanation :

Price elasticity of demand =percentage change in quantity demanded /percentage change in price

0.30=percentage change in quantity demanded /10

0.30*10=percentage change in quantity demanded

3=percentage change in quantity demanded.

So, quantity demanded will decrease by 3%.

When price elasticity of demand is less than 1 it is inelastic. When demand is inelastic price and total revenue moves into same direction. So when price increases total revenue will increase.

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