A manufacturer of frozen pizzas found that total revenuedecreased when price was

Question

A manufacturer of frozen pizzas found that total revenuedecreased when price was lowered from $5 to $4. It was also foundthat total revenue decreased when price was raised from $5 to $6.Thus, A.the demand for pizza is elastic above $5 and inelastic below$5. B.the demand for pizza is elastic both above and below$5. C.the demand for pizza is inelastic above $5 and elasticbelow$5. D.$5 is not the equilibrium price of pizza. A manufacturer of frozen pizzas found that total revenuedecreased when price was lowered from $5 to $4. It was also foundthat total revenue decreased when price was raised from $5 to $6.Thus, A.the demand for pizza is elastic above $5 and inelastic below$5. B.the demand for pizza is elastic both above and below$5. C.the demand for pizza is inelastic above $5 and elasticbelow$5. D.$5 is not the equilibrium price of pizza.

Explanation / Answer

A. the demand for pizza is elastic above $5 and inelastic below $5. Explanation ElasticityCoefficient Price Increase Price Decrease greater than 1 TR Decrease TR Increase = 1 TR No change TR No change less than 1 TR Increase TR Decrease This table will help you figure out the elasticity.

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