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Hello.
In the question 160 which is a section B questions asks..
Rotanola Co produces another phone with a price elasticity of demand equal to one. Indicate, by selecting the relevant boxes in the table below, whether each of the following statements are true or false.
And the statement : Total expenditure will remain constant despite price changes. Is (true).
How is the statement true? Because is price has been changed, therefore the demand will change also, and therefore the costs (vc per unit) are likely to increase or decrease depending demand level. Then how does the total expenditure remain constant?
The statement is not true and BPP have made a mistake.
Although as the price goes up the demand will fall by the same % (and vice versa) and so the total will not change a lot, it will not stay constant.
Fortunately this was not a real past exam question but one that BPP invented 🙂
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