1)State true or false and justify your answer:

If the price elasticity of demand for a good is 3, then total revenue will increase.

2)State true or false and justify your answer:

Demand for a product is more elastic in the long run than in the short run.

1)The statement is: FALSE:

If the price elasticity of demand for a good is 3, then total revenue will decrease as price increases. This is because the price elasticity of demand is elastic. A small unit change in price will cause a greater change in quantity demanded. That is, the quantity demanded is more responsive to a small unit change in price. Price elasticity of 3 means that a one-unit change in price will cause the quantity demanded to change by three units. Therefore, an increase in price will decrease the total revenues (price multiplied with quantity sold).

2)Demand for a product is more elastic in the long run than in the short run. True.

Demand is said to be more elastic when customers have more time to react to the changes in the price of products and services. In the short term, customers lack enough time to respond to the changes in price; hence, the change in demand is not obvious. This translates to low elasticity in the short run. On the other hand, in the long run, customers have time to find substitutes, so demand becomes more elastic.