Economics 13th Edition by James Gwartney, Richard Stroup, Russell Sobel, David Macpherson

Exercise 8

Are the following statements true or false? Explain your answers.
a. A 10 percent reduction in price that leads to a 5 percent increase in the amount purchased indicates a price elasticity of more than 1.
b. A 10 percent reduction in price that leads to a 2 percent increase in total expenditures (or total revenue) indicates a price elasticity of more than 1.
c. If the percentage change in price is less than the resultant percentage change in quantity demanded, demand is inelastic.