Answer to Question #286111 in Microeconomics for Shub

Question

A price change causes the quantity demanded of a good to decrease by 25 percent, while the total revenue of that g 10 percent. Is the demand curve elastic or inelastic?

Answer 1

Solution:

The demand curve is inelastic.

 

An inelastic demand curve is one where a given percentage change in price results in a smaller percentage change in the quantity demanded. Therefore, the total revenue won't be affected as much by the small demand decrease.