ECONOMICS
DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Quantity demanded does not change.
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Total revenue increases.
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Total revenue does not change
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Quantity demanded increases.
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Detailed explanation-1: -If the price elasticity of demand for a product equals 1, as its price rises the total revenue does not change because the demand is unit elastic.
Detailed explanation-2: -If price elasticity is exactly 1 (price change leads to an equal percentage change in demand), it is known as unitary elasticity.
Detailed explanation-3: -Elasticity of Demand by Price Price elasticity of demand is an indicator of the impact of a price change, up or down, on a product’s sales. If the price elasticity of demand is greater than 1, it is deemed elastic. That is, demand for the product is sensitive to an increase in price.
Detailed explanation-4: -when the elasticity is greater than one, indicating that a 1 percent increase in price will result in a more than 1 percent increase in quantity; this indicates a high responsiveness to price.
Detailed explanation-5: -When the elasticity of demand is unity, the Marginal revenue is zero. Thus because of marginal revenue which is zero, the elasticity of demand is one, this means the proportionate change in quantity demand is equal to the proportionate change in price.