ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -If the price for an inelastic good is lowered, the demand for that good does not increase, resulting in less overall revenue due to the lower price and no change in demand.

Detailed explanation-2: -"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-3: -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-4: -For an inelastic good, a one percent change in the price results in a less than one percent change in the quantity demanded. A price increase for an inelastic good will increase total revenue while a price decrease for an inelastic good decreases 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