Assume lawyer services are priced by the hour and elasticity of demand for a particular lawyer is 0.6. If she were to increase her hourly rate by 50%, we would expect the quantity demanded of her advice would by , and revenue from her business would .

A. fall, 83%, rise
B. rise, 83%, fall
C. fall, 30%, rise
D. rise, 30%, rise.

C. Fall, 30%, Rise

Explanation:

P.Ed = % change in demand / % change in price.

Given : Price rise by 50% , P.Ed = 0.6

So, % change in demand = P.ed x % change in price

% change in demand = 0.6 (50)

% change in demand = 30%

Law of demand states negative relationship between price & demand, so P.ed is negative. Price rise 50% reduces demand by 30%.

So, Given PEd = 0.6 (i.e < 1 ) : Inelastic Demand implies price & total revenue are directly related related to each other. So, price fall lead to TR fall & price rise lead to TR rise.