ECONOMICS
PROFIT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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increase in revenue
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increase in revenue initially, and a subsequent fall in the long run
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reduction in total revenue
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exit from the market
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Detailed explanation-1: -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-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) If demand is price inelastic, then increasing price will decrease revenue. b) If demand is price elastic, then decreasing price will increase revenue.
Detailed explanation-4: -If demand for a product is price elastic and the price increases, total revenue will decrease. If demand for a product is price inelastic and the price decreases, total revenue will decrease.