ECONOMICS
ELASTICITY OF DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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An increase in the supply
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A decrease in the demand
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An increase in the demand
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A decrease in both the demand & the supply
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Detailed explanation-1: -On a linear demand curve, the price elasticity of demand varies depending on the interval over which we are measuring it. For any linear demand curve, the absolute value of the price elasticity of demand will fall as we move down and to the right along the curve.
Detailed explanation-2: -More Overall Revenue 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: -a) If demand is price inelastic, then increasing price will decrease revenue.
Detailed explanation-4: -Since the percentage change in quantity demanded is greater than the percentage change in price, raising the price of an elastic good will decrease total revenue while lowering the price of an elastic good increases total revenue.