Question

When the price of commodity B rises by 10%, the total revenue received by firms that sell

commodity B rises by 5%. The demand for commodity B is therefore...

a) perfectly elastic.

b) unitary elastic

c) inelastic

d) elastic

Answer 1

c) inelastic

This is because an increase in the price of commodity B by 10% causes an increase in its demand hence the increase in revenue by a smaller percentage 5% .

This means the change in the price had a little impact on the demand of the commodity hence the demand is inelastic.