## Get your research papers, homework and online exams done from just \$8 per page

We also have verified textbook solutions at just \$3 per answer; No subscription needed

# If a 4 percent rise in the price of peanut butter causes total revenue to decrease by 8 percent, then demand for peanut butter

Category:
 ▲ 0 ▼ ♥ 0 If a 4 percent rise in the price of peanut butter causes total revenue to decrease by 8 percent, then demand for peanut butter A) is elastic. B) is inelastic. C) is unit elastic. D) has a price elasticity of 1/2. E) has a price elasticity of 2.

0

### A) is elastic.

Demand elasticity refers to the responsiveness of quantity demanded to changes in price or other demand determinants. The degree of elasticity of demand depends on how much the quantity demanded changes in response to a change in price. When demand is elastic, a small change in price causes a relatively large change in the quantity demanded. In contrast, when demand is inelastic, a change in price causes a relatively small change in the quantity demanded.

In the case of inelastic demand, a change in price does not significantly affect the quantity demanded. Therefore, the total revenue earned by the seller is less likely to change as a result of a change in price. This is because an increase in price leads to a smaller decrease in quantity demanded and a smaller increase in revenue, and vice versa.

On the other hand, when demand is elastic, a small change in price causes a significant change in the quantity demanded. As a result, the seller's total revenue is likely to change in the opposite direction of the price change. Specifically, if the seller raises the price, the quantity demanded decreases significantly, leading to a decrease in total revenue. Conversely, if the seller lowers the price, the quantity demanded increases significantly, leading to an increase in total revenue.

In the provided information, we can determine that the demand is elastic because an increase in price led to a decrease in revenue. However, we cannot determine the exact degree of elasticity without knowing the exact change in quantity demanded.

Marked as spam
Answered on June 13, 2020 5:34 pm

## Professional Essay Helpers Online

Get your papers written by online essay writers available 24/7. Submit your assignments and get a quality plagiarism-free paper via email.