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15 May, 07:00

An accountant increases the price he charges for his services by 14 percent. In response, the demand for his services decreases by 6 percent. Will the accountant's revenue from his accounting services increase, decrease, or remain unchanged?

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  1. 15 May, 07:41
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    Decrease

    Explanation:

    Given that

    Change in quantity demanded = 6%

    change in price = 14%

    Price elasticity of demand = (Percentage change in quantity demanded) : (percentage change in price)

    = 6% : 14%

    = 0.42

    Price elasticity of demand is greater than 1 that which means demand is elastic. Therefore the increase in price, the revenue will decrease because demand is elastic.
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