Suppose a decrease in the supply of bottled water resulted in a decrease in revenue. This indicates that A. the demand for bottled water is price inelastic in the price range considered. B. the supply of bottled water is price inelastic in the price range considered. C. the supply of bottled water is price elastic in the price range considered. D. the demand for bottled water is price elastic in the price range considered.
Answers: 1
, where 
is the price and 
is the quantity demanded. This means that elasticity reflects what is the percentage change in quantity 
in the presence of a percentage change 
in prices.A decrease in supply would tipically rise prices, ceteris paribus.If the decrease in supply was the cause of a decrease in revenues, it means that the percentage change in demanded quantity as a consequence of the rise in prices was bigger than the change in prices.To see it more clearly, remember that the seller's revenue can be express as 
. If prices increased, but revenues fall, then 
, then 
, wich is consistent with an elastic range of demand.Another question on Business
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Suppose a decrease in the supply of bottled water resulted in a decrease in revenue. This indicates...
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