posted by mm on .
Every year Christmas tree vendors bring tens of thousands of trees from the forests of New England to New York City and Boston. During the last two years, the market has been very competitive; as a result, price has fallen by 10 percent. If the price elasticity of demand was −1.3, vendors would lose revenues altogether as a result of the price decline.
This statement is incorrect, when price decreases and demand is relatively elastic, revenue (and expenditure) will rise.