Question

Suppose Rhonda owns and operates a surf shop. Last week, Rhonda ran a 30-percent off sale on all items in her shop and her revenues decreased by 35 percent. Everything else held constant, it can be concluded with certainty that Rhonda's customers' demand is:________.
A. price inelastic
B. price elastic
C. unit elastic

Answer 1

Answer:

Explanation:

price elasticity of demand = percentage change in quantity demanded / percentage change in price

revenue = price x quantity

if price decreased by 30% and total revenue decreased by 35%, then PED is inelastic

a will show you in an example

original price = $10

original quantity = 100

if PED was unit elastic

= 30% / -30% = -1, sales volume increased by 30%

total revenue went form $1,000 to $910

if PED was elastic

= 50% / -30% = -1.7, sales volume increased by more than 30%, lets say 50%

total revenue went from $1,000 to $1,050

if PEd was inelastic

= 10% / -30% = -0.33, sales volume increased by less that 30%, lets say 10%

total revenue went from $1,000 to $770

the more inelastic, the larger the decrease in total revenue

Answer 2

The demand of Rhonda's customers would be characterized as:

A). Price Inelastic

• "Price Inelastic demand" is described as the demand in which the demand remains a little affected by a bigger change in the price of that product or commodity.
• In the given situation, the demand for the surf at Rhonda's shop would be considered price inelastic because, despite the 30% off, the revenue of her shop decreased.
• This implies that the surf exemplifies an essential item and its consumers are not much affected by the fall in the price.

Thus, option A is the correct answer.

Learn more about "Elasticity of Demand" here:

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