Suppose the price elasticity coefficients of demand are 1.43,0.67,1.11,and 0.29 for products W,X,Y,and Z respectively.A 1 percent decrease in price will increase total revenue in the case(s) of:

A) W and Y.
B) Y and Z.
C) X and Z.
D) Z and W.

Question

William FitzGerald · Accepted Answer

Final Answer : A, Explanation :  The price elasticity coefficient measures the responsiveness of demand to changes in price. If the coefficient is greater than 1, it means demand is elastic, and a decrease in price will lead to an increase in total revenue because the increase in quantity sold will more than offset the decrease in price. On the other hand, if the coefficient is less than 1, it means demand is inelastic, and a decrease in price will lead to a decrease in total revenue because the increase in quantity sold will not offset the decrease in price.W and Y have price elasticity coefficients of 1.43 and 1.11 respectively, which are both greater than 1, indicating that demand is elastic. Therefore, a 1 percent decrease in price will lead to an increase in total revenue for products W and Y.X and Z have price elasticity coefficients of 0.67 and 0.29 respectively, which are both less than 1, indicating that demand is inelastic. Therefore, a 1 percent decrease in price will lead to a decrease in total revenue for products X and Z.Therefore, the best choice is A) W and Y.

Suppose the price elasticity coefficients of demand are 1.43,0.67,1.11,and 0.29 for products W,X,Y,and Z respectively.A 1 percent decrease in price will increase total revenue in the case(s) of:

A) W and Y.
B) Y and Z.
C) X and Z.
D) Z and W.

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Learning Objectives

Related questions

Suppose the price elasticity coefficients of demand are 1.43,0.67,1.11,and 0.29 for products W,X,Y,and Z respectively.A 1 percent decrease in price will increase total revenue in the case(s) of:A) W and Y.B) Y and Z.C) X and Z.D) Z and W.

Definitions

Learning Objectives

Learning Objectives

Related questions

Suppose the price elasticity coefficients of demand are 1.43,0.67,1.11,and 0.29 for products W,X,Y,and Z respectively.A 1 percent decrease in price will increase total revenue in the case(s) of:

A) W and Y.
B) Y and Z.
C) X and Z.
D) Z and W.