Question

An accountant increases the price he charges for his services by 14 percent. In​ response, the demand for his services decreases by 6 percent. Will the​ accountant's revenue from his accounting services​ increase, decrease, or remain​ unchanged?

Answer 1

Decrease

Step-by-step explanation:

Given that

Change in quantity demanded = 6%

change in price = 14%

Price elasticity of demand = (Percentage change in quantity demanded) ÷ (percentage change in price)

= 6% ÷ 14%

= 0.42

Price elasticity of demand is greater than 1 that which means demand is elastic. Therefore the increase in price, the revenue will decrease because demand is elastic.