ECONOMICS
DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Will change the quantity in same direction
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Will change total revenue in same direction
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Will change total revenue in the opposite direction
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Will not change quantity
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Detailed explanation-1: -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-2: -The correct answer is a) Price and total revenue move in the same direction. When the price of a product with inelastic demand is raised, the percentage increase in price is greater than the percentage change in demand.
Detailed explanation-3: -When demand is inelastic, total revenue changes in the same direction as prices, since the price change more than compensates for the change in quantity, which is represented by a steep demand curve. Hence, raising prices increases revenue.
Detailed explanation-4: -Price and total revenue have a positive relationship when demand is inelastic (price elasticity < 1), which means that when price increases, total revenue will increase too.
Detailed explanation-5: -When demand is inelastic, an increase in the price of a commodity would cause the total expenditure of the consumers to increase.