EBK FOUNDATIONS OF ECONOMICS
EBK FOUNDATIONS OF ECONOMICS
8th Edition
ISBN: 9780134516196
Author: BADE
Publisher: PEARSON CO
Question
Chapter 5, Problem 1SPPA
To determine

To check:

If the demand for home heating oil is elastic or inelastic using the total revenuetest.

Expert Solution & Answer
Check Mark

Explanation of Solution

The price of home heating oil increased by 20 percent and the quantity demanded decreased by 2 percent. This shows that the increased price of home heating oil did not create any drastic change in the quantity demanded.Thus, it has an inelastic demand.

In conclusion, the total revenue test could be executed easily and with a glance,we can find whether the product or service is inelastic or elastic, if the required percentage is available.

Economics Concept Introduction

Total revenue test: It is used to determine whether a product or service has an elastic or inelastic demand.When increase in price increases the total revenue, then the demand is said to be inelastic.

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