Given the price elasticities of demand for products A, B, C, and D as 0.27, 0.78, 1.42, and 1.77 respectively, for which products will a 1 percent decrease in price lead to a decrease in total revenue?

To understand why a 1 percent decrease in price will lead to a decrease in total revenue for certain products, we need to consider the concept of price elasticity of demand. Price elasticity of demand measures how sensitive the quantity demanded of a good is to a change in its price.

When the price elasticity of demand is less than 1 (inelastic), a decrease in price results in a proportionally smaller increase in quantity demanded, leading to a decrease in total revenue. Conversely, when the price elasticity is greater than 1 (elastic), a decrease in price leads to a proportionally larger increase in quantity demanded, resulting in an increase in total revenue.

For product A, with a price elasticity of 0.27, the demand is inelastic. Therefore, a 1 percent decrease in price will cause a less than 1 percent increase in quantity demanded, resulting in a decrease in total revenue.

For product B, with an elasticity of 0.78, the demand is also inelastic, meaning a decrease in price will similarly lead to a decrease in total revenue for the same reasons.

On the other hand, products C and D have elasticities of 1.42 and 1.77 respectively. Both exhibit elastic demand, so