question archive If the price elasticity of demand is -1
If the price elasticity of demand is -1
Subject:EconomicsPrice:2.88 Bought3
If the price elasticity of demand is -1.1 and the firm increases price, revenue will:
a. Increase,
b. Decrease,
c. Stay constant,
d. Become zero, they would lose all their customers.
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The correct option is (b). Decrease.
Here, PED is -1.1 and we know that when PED > 1 then the demand is said to be elastic. Hence, a rise in the price causes a larger decline in the quantity demanded which in turn reduces the total revenue of the firm.
