Question

Write down the following scenarios as examples of elastic, inelastic, or unit elastic demand.

a. When Ruko, a device used to stream movies at home, increases prices by 39 %, total revenue decreases by 55 %.
b. When Cinema Supreme decreases ticket prices by 5 %, total revenue does not change.
c. When Bluebox, a DVD rental kiosk, increases its prices by 44 %, total revenue increases by 31 %.

Answer 1

Answer and Explanation:

The classification is as follows:

a. In the case when the quantity demanded is more than the price so it is a price elastic demand

b. In the case when the change in price of 1% lower than the change in quantity demanded so it is price inelastic demand

c. And, in the case where there is a change of 1% in a price that generated the 1% change in quantity demanded is unit elastic demand