Question

Identify the scenarios as examples of elastic, inelastic, or unit elastic demand.

a. When Ruko, a device used to stream movies at home, increases prices by
48
percent, total revenue decreases by
61
percent.



b. When Cinema Supreme increases ticket prices by
12
percent, total revenue does not change.



c. When Bluebox, a streaming service for foreign television shows and movies, increases its prices by
57
percent, total revenue increases by
22
percent.

Answer 1

Answer: a. This scenario is an example of elastic demand, as the percentage decrease in total revenue is greater than the percentage increase in price. When a price increase leads to a more than proportional decrease in quantity demanded and revenue, demand is said to be elastic.

b. This scenario is an example of inelastic demand, as the percentage change in price does not lead to any change in total revenue. When a price increase leads to a proportionally smaller decrease in quantity demanded and revenue, demand is said to be inelastic.

c. This scenario is an example of inelastic demand, as the percentage increase in total revenue is less than the percentage increase in price. When a price increase leads to a proportionally greater increase in revenue, demand is said to be inelastic.

Explanation: