Explanation:
The correct answer is B because the price elasticity of demand (PED) measures the responsiveness of quantity demanded to a change in price. A PED of 0.8 implies that a 10% increase in price will lead to an 8% decrease in quantity demanded (volume). This relationship is derived from the formula: % change in quantity demanded = PED × % change in price. Since the unit cost remains constant, the change in revenue or cost of sales is not directly indicated by PED. Therefore, the most likely outcome is an 8% reduction in sales volume.
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If the price elasticity of demand for a product is 0.8 and its unit cost remains constant, a 10% increase in its selling price will most likely result in:
A
No change in the cost of sales.
B
An 8% reduction in sales volume.
C
An 8% increase in total revenue.
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