ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Price and total revenue have a negative relationship when demand is elastic (price elasticity > 1), which means that increases in price will lead to decreases in total revenue. Price changes will not affect total revenue when the demand is unit elastic (price elasticity = 1).

Detailed explanation-2: -Price and total revenue are inversely related when demand is c. elastic . It is because elastic demand implies the more change in quantity demanded as compared to change in price. As price rises, the quantity demanded falls more, which also reduces the total revenue of the producer.

Detailed explanation-3: -If demand is elastic at a given price level, then should a company cut its price, the percentage drop in price will result in an even larger percentage increase in the quantity sold-thus raising total revenue.

Detailed explanation-4: -When demand is inelastic (price elasticity ), price and total revenue have a positive relationship, which means that as price rises, total revenue rises as well. 2. When demand is elastic (price elasticity ), price and total revenue have a negative relationship, meaning that price rises lead to lower total revenue.

Detailed explanation-5: -If the rectangle area representing the price effect is greater than that representing the quantity effect, demand is inelastic (Ed<1) Similarly, if the reverse is true, the product’s demand is elastic (Ed>1) More items