If the price elasticity of demand for a good is 0.43, an increase in the price of the good will result in?
a
an increase in profit by 43%
b
a net gain
c
a decrease in profit 43%
d
a net loss
Explanation
Correct Option
bNo explanation available
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Ipinyomi
1 year ago
B. a net gain.
Since the price elasticity of demand is 0.43 (inelastic demand), the percentage decrease in quantity demanded is smaller than the percentage increase in price.
This means that the total revenue (and likely profit) will increase because consumers are not very responsive to the price increase, leading to a net gain for the producer.
