Think back to our discussions of changes in total revenue and price and how the concept of elasticity was used. When a firm decreases price and demand is elastic, the percentage change in quantity demanded will be A) (greater than / less than) the percentage change in price. Therefore, revenue will B) (increase / decrease). If the demand is inelastic, total revenue will C) (increase / decrease) when price decreases.

(greater than

increase

decrease

Explanation:

Price elasticity of demand measures the responsiveness of quantity demanded to changes in price of the good.

Price elasticity of demand = percentage change in quantity demanded / percentage change in price  

If the absolute   value of price elasticity is greater than one, it means demand is elastic. Elastic demand means that quantity demanded is sensitive to price changes.  

Demand is inelastic if a small change in price has little or no effect on quantity demanded. The absolute value of elasticity would be less than one

answer; the correct answer is (direct foreign investment);