Question

When the price of chocolate-covered peanuts decreases from $1.10 to $0.95, the quantity demanded increases from 190 bags to 215 bags. in this price range, the demand for chocolate covered peanuts is _____, and total revenue will _____ when price decreases?

Answer 1

In this price range, the demand for chocolate covered peanuts is increasing, and the total revenue will decrease when the price decreases.

Total revenue currently ($1.10)(190) = $209
Total revenue with demand increase but price decrease = ($0.95)(215) = $204.25

Although the demand is increasing, due to them dropping the price by $0.15 they are lowering their revenue on the chocolate covered peanuts by $4.75.