When price elasticity of demand is equal to unity, a small decrease in price: increases total...

When price elasticity of demand is equal to unity, a small decrease in price:

increases total revenue.

decreases total revenue.

has no effect on revenues.

raises marginal revenue.

Solutions

Expert Solution

Option C.

The price elasticity of demand measures the change in quantity demanded in accordance with the changes in the price of a good.
When price elasticity of demand is unity, there will an equal change in quantity demanded when the price changes.
Hence when the P.E.D is unity, a small decrease in price will increase the quantity demanded but the total revenue will not change.

Rahul Sunny answered 1 year ago

Next > < Previous

Related Solutions

As price elasticity of demand increases, the burden of a taxgets _______; as price elasticity...

As price elasticity of demand increases, the burden of a tax gets _______; as price elasticity of supply increases, the burden of a tax gets _________.(Here, you can read "bigger" as "heavier" and "smaller" as "lighter" if that helps.)A. smaller; biggerB. bigger; smallerC. smaller; smallerD. bigger; bigger

Question: Equilibrium price must decrease if: a. demand increases and supply increases b. demand increases and...

Question: Equilibrium price must decrease if: a. demand increases and supply increases b. demand increases and supply decreases c. demand decreases and supply decreases d. demand decreases and supply increases

The price elasticity of demand for cat food is -0.4 and the price increases by 6%. ...

The price elasticity of demand for cat food is -0.4 and the price increases by 6%. a. How much will sales of cat food change? Show your work. b. What will happen to consumer expenditures on Purina cat food? Explain.

1. The elasticity of demand for marijuana is -0.5. If the price of marijuana increases by...

1. The elasticity of demand for marijuana is -0.5. If the price of marijuana increases by 10%, by how much does quantity demanded decrease?

Suppose income elasticity of demand is equal to 2.0 a. If income increases by 10%, Quantity...

Suppose income elasticity of demand is equal to 2.0 a. If income increases by 10%, Quantity Demanded will ____ by ___% b. The demand is income ____ because the coefficient is _____1. c. Since the income elasticity is ____, buyers view this good as a(n) ____ good. d. As income increases, demand for this good will ___; as income increases, the demand curve will shift to the ____.

A product has unit elasticity of demand when the price elasticity of demand is A. less...

A product has unit elasticity of demand when the price elasticity of demand is A. less than 1. B. equal to 0. C. equal to 1. D. greater than 1.

Evaluate the following statements: “Moral hazard behavior decreases when the price elasticity of demand increases.” “Managed...

Evaluate the following statements: “Moral hazard behavior decreases when the price elasticity of demand increases.” “Managed care creates incentives that improve the principal-agent relationship.” “Adverse selection and favorable/preferred selection make health insurance more affordable.”

True or False: The value of the price elasticity of demand is equal to the slope of the demand curve.

4. Elastic, inelastic, and unit-elastic demand The following graph shows the demand for a goodFor each of the regions listed in the following table, use the midpoint method to identify if the demand for this good is elastic, (approximately) unit elastic, or inelastic. True or False: The value of the price elasticity of demand is equal to the slope of the demand curve.

True or False: The value of the price elasticity of demand is not equal to the slope of the demand curve.

Elastic, inelastic, and unit-elastic demand The following graph shows the demand for a good. For each of the regions, use the midpoint method to identify whether the demand for this good is elastic, (approximately) unit elastic, or inelastic. Region Elastic Inelastic Unit Elastic Between X and Y Between W and X Between V and Z True or False: The value of the price elasticity of demand is not equal to the slope of the demand curve. True False

Demand is inelastic if the price elasticity of demand is numerically (absolute value terms) Equal to...

Demand is inelastic if the price elasticity of demand is numerically (absolute value terms) Equal to 1 Equal to 0 Less than 1 all of the above none of the above In the long run a company that produces and sells laundry detergent increases all of its inputs by 25% and its output rises from 1,250 units to 2,000 units. For this range of output, the laundry detergent company exhibits increasing returns to scale. constant returns to scale. decreasing returns...

Subjects