BUSINESS ADMINISTRATION
BUSINESS ECONOMICS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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1.A decrease in total revenue
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2.An increase in total revenue
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3.No change in total revenue
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4.A decrease in quantity demanded
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Detailed explanation-1: -When the price elasticity of demand for a good is perfectly inelastic, changes in the price do not affect the quantity demanded the good; raising prices will always cause total revenue to increase.
Detailed explanation-2: -a) If demand is price inelastic, then increasing price will decrease revenue.
Detailed explanation-3: -When demand is price inelastic, a given percentage change in price results in a smaller percentage change in quantity demanded. That implies that total revenue will move in the direction of the price change: an increase in price will increase total revenue, and a reduction in price will reduce it.
Detailed explanation-4: -In case of perfectly inelastic demand the change in price will have no effect on the quantity demanded.
Detailed explanation-5: -An increase in price result in an increase in total revenue(total expenditure), indicates direct relation so demand will be inelastic (E<1).