Question

If a Pizza Hut restaurant near campus reduces its pizza prices by 15% and as a result its total revenue from pizza sales increases, this indicates that the price elasticity of demand was _______ (elastic, inelastic)

Answer 1

elasticity

Step-by-step explanation:

Elasticity is a concept that aims to measure the sensitivity of demand in the face of price changes. When the price increases / decreases and the quantity demanded does not decrease / increases considerably, we say that the demand is inelastic (little price sensitive). On the contrary, when the price increases / decreases and the quantity demanded decreases / increases considerably, we say that the demand is elastic, that is, sensitive to price changes. In the case narrated, the decrease in the price of pizza increased the revenue of the pizza because it considerably increased the demand. Therefore, the demand for pizza is price elastic.