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16 September, 19:50

An owner of a local salon realized that by decreasing the prices that she charges for haircuts, her revenue has increased. This implies that a. The demand for her haircuts is elastic b. The demand for her haircuts is unitary elastic c. The demand for her haircuts is inelastic d. The demand for her haircuts is perfectly inelastic

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  1. 16 September, 19:52
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    The correct answer is letter "A": The demand for her haircuts is elastic.

    Explanation:

    Elasticity is a feature of certain goods and services that affect their quantity demanded after a change in prices. The price elasticity of demand is calculated by dividing the percentage of change in quantity demanded by the percentage of change in price. Results equal to or greater than one (1) imply the demand for that product is elastic while results lower than 1 means the demand is inelastic.

    Thus, if a salon owner realizes her revenue increased after decreasing the haircut prices, it implies the demand for haircuts is elastic.
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