ECONOMICS
ELASTICITY OF DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Total revenue will rise.
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Total revenue will fall.
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Total revenue will remain the same.
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Total revenue will fluctuate.
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Detailed explanation-1: -If demand for a good is elastic, raising the price could reduce revenue. the passage of time affects elasticity. the law of demand eliminates elasticity. luxury goods are nut subject to elasticity.
Detailed explanation-2: -If demand is elastic, then a price increase reduces the total revenue. When the price increases, then the demand falls by a considerable percentage. Then, total revenue starts moving in contradictory directions. Therefore, total income declines when the price of any commodity rises.
Detailed explanation-3: -A price increase will therefore increase total revenue while a price decrease will decrease total revenue. Finally, when the percentage change in quantity demanded is equal to the percentage change in price, demand is said to be unit elastic.
Detailed explanation-4: -Elastic demand occurs when the price of a good or service affects consumer demand. If the price goes down just a little, consumers will buy a lot more. If prices rise just a bit, they’ll stop buying as much and wait for prices to return to normal.