ECONOMICS
DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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True
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False
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Either A or B
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None of the above
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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: a reduction in price will reduce total revenue, and an increase in price will increase it.
Detailed explanation-2: -If demand is inelastic, a decrease in price will cause total revenue to fall. If demand is elastic, an increase in price will cause total revenue to fall. If demand is elastic, a decrease in price will cause total revenue to rise.
Detailed explanation-3: -If demand for a product is price elastic and the price increases, total revenue will decrease. If demand for a product is price inelastic and the price decreases, total revenue will decrease.
Detailed explanation-4: -However, if demand is inelastic at the original quantity level, then should the company raise its prices, the percentage increase in price will result in a smaller percentage decrease in the quantity sold-and total revenue will rise.