Answer to Question #129367 in Microeconomics for arshiam Zafar

Question

If the price elasticity of demand for Pizza is 1 at the initial equilibrium and price of Pizza increases by 10 percent, by how much does Pizza’s seller revenue change?

Answer 1

For unit elastic demand where price elasticity of demand is 1, change in price of a product causes the same percentage change in quantity demanded.

Hence increase in price of Pizza by 10 percent will causes a 10 percent decrease in quantity of Pizza demanded.

Hence the Pizza's seller revenue will remain the same. (no change)