Question

Suppose the price elasticity of demand for your economics textbook is −1. If the publisher raises the price by 5 percent, then _____

Answer 1

the total revenue remains the same

Step-by-step explanation:

The price elasticity of demand for a commodity is defined as the ratio of the demand change (%) in the commodity to supply change in the commodity. Thus, we have:

Price elasticity of demand = percent change in demand/percent change in supply

Therefore, if the price elasticity of demand is less than 0 i.e. -1, and the commodity price increases by 5%, the total revenue made from the commodity will remain the same.

Answer 2

Total revenue of text book will not change.

Step-by-step explanation:

This is because the price elasticity curve is in elastic(it is negative)