Answer to Question #247436 in Economics of Enterprise for delia

Question

A price change causes the quantity demanded of a
good to decrease by 30 percent, while the total revenue
of that good increases by 15 percent. Is the demand
curve elastic or inelastic? Explain.

Answer 1

The Demand curve is inelastic. There is positive relationship between the price increase and total revenue. If total revenue increases when price is increases it means that the consumers have are used to consume the good and probably has no substitute or its highly addictive like cigarette smoking.