Author Question: The change in total welfare from a 10 increase in price will depend only on the elasticity of ... (Read 65 times)

littleanan · **on:** Jul 1, 2018

The change in total welfare from a 10 increase in price will depend only on the elasticity of demand.

Indicate whether the statement is true or false

Question 2

Consumers who are more sensitive to changes in price suffer a greater loss of consumer surplus from any given price increase.

Indicate whether the statement is true or false

kilada · **Reply #1 on:** Jul 1, 2018

Answer to Question 1

False. The effect of a price change also depends on revenue changes.

Answer to Question 2

False. Consumers who are more sensitive to the price increase will reduce their purchase of the good by a greater extent than those who are not price sensitive. As a result, they incur a smaller loss of consumer surplus.