High School

When the price of a good increased by 5 percent, the quantity demanded decreased by 10 percent.

The price elasticity of demand is _______. A price rise will ______ total revenue. An example of a good with such a demand is ______.

A. 0.50; decrease; bread
B. 0.50; increase; orange juice
C. 2.00; decrease; orange juice
D. 2.00; increase; bread
E. 0.50; increase; toothpaste

Answer :

The price elasticity of demand is 2.00, indicating a highly responsive demand. A price rise will decrease the total revenue with such demand. An example of a good with elastic demand is orange juice.

The price elasticity of demand measures how responsive the quantity demanded of a good is to a change in price. It is calculated by dividing the percentage change in quantity demanded by the percentage change in price. In this case, the price elasticity of demand is 2.00, which indicates that the good is elastic and highly responsive to price changes.

A price rise will decrease the total revenue when the demand is elastic, as it leads to a proportionately larger decrease in quantity demanded compared to the increase in price. An example of a good with such demand is orange juice.

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