{"id":187769,"date":"2025-02-06T06:28:29","date_gmt":"2025-02-06T06:28:29","guid":{"rendered":"https:\/\/learnexams.com\/blog\/?p=187769"},"modified":"2025-02-06T06:28:31","modified_gmt":"2025-02-06T06:28:31","slug":"if-a-20-percent-decrease-in-the-price-of-a-good-leads-to-a-15-percent-increase-in-the-quantity-demanded","status":"publish","type":"post","link":"https:\/\/www.learnexams.com\/blog\/2025\/02\/06\/if-a-20-percent-decrease-in-the-price-of-a-good-leads-to-a-15-percent-increase-in-the-quantity-demanded\/","title":{"rendered":"If a 20 percent decrease in the price of a good leads to a 15 percent increase in the quantity demanded"},"content":{"rendered":"\n<p>151) If a 20 percent decrease in the price of a good leads to a 15 percent increase in the quantity demanded, then demand is <strong>and total revenue will<\/strong> as a result of the fall in price.<\/p>\n\n\n\n<p>A) elastic; increase<\/p>\n\n\n\n<p>B) elastic; decrease<\/p>\n\n\n\n<p>C) inelastic; increase<\/p>\n\n\n\n<p>D) inelastic; decrease<\/p>\n\n\n\n<p>152) The price elasticity of demand for wheat is 0.42. A drought cuts the supply of wheat. What will happen to the farmers&#8217; total revenue?<\/p>\n\n\n\n<p>A) The total revenue will increase.<\/p>\n\n\n\n<p>B) The total revenue will decrease.<\/p>\n\n\n\n<p>C) The total revenue will not change.<\/p>\n\n\n\n<p>D) There is not enough information to determine what happens to the total revenue.<\/p>\n\n\n\n<p>153) The price elasticity of demand for corn is 0.4. A new hybrid of corn is discovered and all farmers start to use it, which increases the quantity of corn they can produce from each acre. What happens to the farmers&#8217; total revenue?<\/p>\n\n\n\n<p>A) The total revenue will increase.<\/p>\n\n\n\n<p>B) The total revenue will decrease.<\/p>\n\n\n\n<p>C) The total revenue will not change.<\/p>\n\n\n\n<p>D) There is not enough information to determine what happens to the total revenue.<\/p>\n\n\n\n<p>154) A university conducts a survey of students, which shows that a 10 percent tuition hike would lead to a 12 percent decrease in the enrollment. If the university wants to increase its total revenue, it should <strong>tuition because the demand for education at this university is <\/strong>.<\/p>\n\n\n\n<p>A) raise; elastic<\/p>\n\n\n\n<p>B) not raise; elastic<\/p>\n\n\n\n<p>C) raise; inelastic<\/p>\n\n\n\n<p>D) not raise; inelastic<\/p>\n\n\n\n<p>155) A university conducts a survey of students, which shows that a 10 percent tuition hike would lead to a 7 percent decrease in the enrollment. If the university wants to increase its total revenue, it should <strong>tuition because the demand for education at this university is <\/strong>.<\/p>\n\n\n\n<p>A) raise; elastic<\/p>\n\n\n\n<p>B) not raise; elastic<\/p>\n\n\n\n<p>C) raise; inelastic<\/p>\n\n\n\n<p>D) not raise; inelastic<\/p>\n\n\n\n<p>156) The price of a bus ride decreases, and the total revenue of the bus company decreases. The demand for bus rides is <strong><em>__<\/em><\/strong>.<\/p>\n\n\n\n<p>A) perfectly elastic<\/p>\n\n\n\n<p>B) inelastic<\/p>\n\n\n\n<p>C) unit elastic<\/p>\n\n\n\n<p>D) elastic but not necessarily perfectly elastic<\/p>\n\n\n\n<p>157) The price elasticity of demand for gasoline is 0.40. If the price of gasoline rises by 20 percent, there will be<\/p>\n\n\n\n<p>A) a decrease of more than 20 percent in the quantity of gasoline demanded.<\/p>\n\n\n\n<p>B) an increase in the total revenue received from the sale of gasoline.<\/p>\n\n\n\n<p>C) a loss of total revenue for gasoline producers, because at a higher price the quantity of gasoline demanded decreases.<\/p>\n\n\n\n<p>D) no change in the quantity of gasoline sold because people need gasoline.<\/p>\n\n\n\n<p>158) When Monica&#8217;s Catering lowered the price of catered meals from $60 per person to $20 per person, the quantity demanded doubled from 500 meals to 1,000 meals. You can conclude that the demand for Monica&#8217;s catered meals over the price range of $20 to $60 is<\/p>\n\n\n\n<p>A) upward sloping.<\/p>\n\n\n\n<p>B) unit elastic.<\/p>\n\n\n\n<p>C) elastic.<\/p>\n\n\n\n<p>D) inelastic.<\/p>\n\n\n\n<p>159) If the demand for a good is unit elastic,<\/p>\n\n\n\n<p>A) a 5 percent increase in price results in a 5 percent increase in total revenue.<\/p>\n\n\n\n<p>B) a 5 percent increase in price results in a 5 percent decrease in total revenue.<\/p>\n\n\n\n<p>C) a 5 percent increase in price does not change total revenue.<\/p>\n\n\n\n<p>D) the demand curve is a straight line with slope of -1.<\/p>\n\n\n\n<p>160) If OPEC, a group of oil producing nations, cuts oil production to increase the total revenue, OPEC presumes that the demand for oil is<\/p>\n\n\n\n<p>A) perfectly elastic.<\/p>\n\n\n\n<p>B) unit elastic.<\/p>\n\n\n\n<p>C) elastic.<\/p>\n\n\n\n<p>D) inelastic.<\/p>\n\n\n\n<p><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-ast-global-color-6-color\"><strong>The Correct Answer and Explanation is :<\/strong><\/mark><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Answers and Explanation:<\/h3>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>151) Answer: C) inelastic; increase<\/strong><\/h4>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Explanation:<\/strong> Price elasticity of demand (PED) is calculated as the percentage change in quantity demanded divided by the percentage change in price. PED=%\u0394Qd%\u0394P=15%20%=0.75PED = \\frac{\\% \\Delta Q_d}{\\% \\Delta P} = \\frac{15\\%}{20\\%} = 0.75 Since the absolute value is less than 1, demand is <strong>inelastic<\/strong>. When demand is inelastic, a decrease in price leads to a <strong>decrease in total revenue<\/strong>. However, when price decreases, revenue increases if demand is elastic.<\/li>\n<\/ul>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>152) Answer: A) The total revenue will increase.<\/strong><\/h4>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Explanation:<\/strong> The price elasticity of demand for wheat is <strong>0.42 (inelastic)<\/strong>. When supply decreases (due to a drought), the price of wheat rises. Since demand is inelastic, the percentage drop in quantity demanded is smaller than the percentage increase in price, leading to <strong>higher total revenue for farmers<\/strong>.<\/li>\n<\/ul>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>153) Answer: B) The total revenue will decrease.<\/strong><\/h4>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Explanation:<\/strong> The price elasticity of demand for corn is <strong>0.4 (inelastic)<\/strong>. An increase in supply leads to a <strong>fall in price<\/strong>. Since demand is inelastic, the percentage increase in quantity demanded is <strong>smaller<\/strong> than the percentage decrease in price, resulting in a <strong>fall in total revenue<\/strong>.<\/li>\n<\/ul>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>154) Answer: B) not raise; elastic<\/strong><\/h4>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Explanation:<\/strong> The price elasticity of demand is: PED=12%10%=1.2PED = \\frac{12\\%}{10\\%} = 1.2 Since demand is <strong>elastic (greater than 1)<\/strong>, increasing tuition would lead to <strong>a decrease in total revenue<\/strong>. The university should <strong>not<\/strong> raise tuition.<\/li>\n<\/ul>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>155) Answer: C) raise; inelastic<\/strong><\/h4>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Explanation:<\/strong> The price elasticity of demand is: PED=7%10%=0.7PED = \\frac{7\\%}{10\\%} = 0.7 Since demand is <strong>inelastic (less than 1)<\/strong>, raising tuition increases total revenue. The university should <strong>raise<\/strong> tuition.<\/li>\n<\/ul>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>156) Answer: B) inelastic<\/strong><\/h4>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Explanation:<\/strong> When a decrease in price leads to a decrease in total revenue, demand is <strong>inelastic<\/strong>, meaning consumers are relatively unresponsive to price changes.<\/li>\n<\/ul>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>157) Answer: B) an increase in the total revenue received from the sale of gasoline.<\/strong><\/h4>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Explanation:<\/strong> Since gasoline has an elasticity of <strong>0.40 (inelastic)<\/strong>, an increase in price leads to <strong>higher total revenue<\/strong> because the percentage decrease in quantity demanded is smaller than the percentage increase in price.<\/li>\n<\/ul>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>158) Answer: C) elastic<\/strong><\/h4>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Explanation:<\/strong> The price decreases from $60 to $20 (<strong>a 66.67% decrease<\/strong>), and the quantity demanded doubles from 500 to 1,000 (<strong>a 100% increase<\/strong>). PED=100%66.67%=1.5PED = \\frac{100\\%}{66.67\\%} = 1.5 Since <strong>PED &gt; 1<\/strong>, demand is <strong>elastic<\/strong>.<\/li>\n<\/ul>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>159) Answer: C) a 5 percent increase in price does not change total revenue.<\/strong><\/h4>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Explanation:<\/strong> When demand is <strong>unit elastic (PED = 1)<\/strong>, total revenue remains <strong>constant<\/strong> despite changes in price.<\/li>\n<\/ul>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>160) Answer: D) inelastic<\/strong><\/h4>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Explanation:<\/strong> If OPEC reduces oil production to increase total revenue, they assume demand is <strong>inelastic<\/strong> (PED &lt; 1). When demand is inelastic, a <strong>decrease in supply raises prices<\/strong> more than it reduces quantity demanded, leading to <strong>higher total revenue<\/strong>.<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>151) If a 20 percent decrease in the price of a good leads to a 15 percent increase in the quantity demanded, then demand is and total revenue will as a result of the fall in price. A) elastic; increase B) elastic; decrease C) inelastic; increase D) inelastic; decrease 152) The price elasticity of demand [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[25],"tags":[],"class_list":["post-187769","post","type-post","status-publish","format-standard","hentry","category-exams-certification"],"_links":{"self":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/187769","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/comments?post=187769"}],"version-history":[{"count":0,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/187769\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/media?parent=187769"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/categories?post=187769"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/tags?post=187769"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}