ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -a) If demand is price inelastic, then increasing price will decrease revenue.

Detailed explanation-2: -On the other hand, if the price for an inelastic good is increased and the demand does not change, the total revenue increases due to the higher price and static quantity demanded. However, price increases typically do lead to a small decrease in quantity demanded.

Detailed explanation-3: -"Inelastic” is an economic term referring to the static quantity of a good or service when its price changes. Inelastic demand means that when the price goes up, consumers’ buying habits stay about the same, and when the price goes down, consumers’ buying habits also remain unchanged.

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.

Detailed explanation-5: -Inelasticity of demand is evident when demand for a good or service is static when its price or other factor changes, Inelastic products are usually necessities without acceptable substitutes. The most common goods with inelastic demand are utilities, prescription drugs, and tobacco products.