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    How do you do this question ? Don't you do 10 * 1.05 so it is A ? Also it is inelastic the demand, so surely the total revenue will rise.

    A product has a price elasticity of demand of –0.5. If the price of this product increases by
    10%, then total revenue will
    A rise by more than 10%.
    B rise by less than 10%.
    C fall by more than 10%.
    D fall by less than 10%
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    PeD = % change in Q demanded / % change in P

    Therefore, the % change in Q demanded = PeD * % change in P
    (As Q demanded is what the question is really asking about)

    Q demanded = PeD * % change in P = 0.5 * 10 = 5%. The answer is B.

    I'm not quite sure where you've got the 1.05 from..?
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    (Original post by NikolaT)
    PeD = % change in Q demanded / % change in P

    Therefore, the % change in Q demanded = PeD * % change in P
    (As Q demanded is what the question is really asking about)

    Q demanded = PeD * % change in P = 0.5 * 10 = 5%. The answer is B.

    I'm not quite sure where you've got the 1.05 from..?
    Hi thanks, how did you know how to rearrange the equation ? How do you do it the right way ?
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    (Original post by furquan)
    Hi thanks, how did you know how to rearrange the equation ? How do you do it the right way ?
    Did you do GCSE Maths or Physics? It's rearrangement in the same way.

    x = y/z

    y = x * z

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    (Original post by furquan)
    How do you do this question ? Don't you do 10 * 1.05 so it is A ? Also it is inelastic the demand, so surely the total revenue will rise.

    A product has a price elasticity of demand of –0.5. If the price of this product increases by
    10%, then total revenue will
    A rise by more than 10%.
    B rise by less than 10%.
    C fall by more than 10%.
    D fall by less than 10%
    Here's how I approached this question (note that Nikola calculated just the %change in QD rather than TR

    PED = %changeP/%changeQd
    so rearranging gives you %changeQd = -5%

    But we want changes in TR, so...

    let p1 = 1 and p2 = 1.1 (10% increase)
    let q1 = x and q2 = 0.95x (5% decrease)

    therefore since TR = PQ, TR1 = x and TR2 = 1.045x

    So the rise in TR is 4.5%, which is < 10%, so B is the answer.
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    Hi since PED is always negative do you ignore the minus sign for -0.5 ? So 0.5 * 10 = 5 so it is B
 
 
 
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