If a decrease in the price of theater tickets increases the total revenue earned by the theater, this is evidence that demand is:
A) price elastic.
B) price inelastic.
C) unitary elastic.
D) perfectly inelastic.

Question

Quizplus · Accepted Answer

When a decrease in price leads to an increase in total revenue, it indicates that demand is price elastic, meaning that consumers are responsive to changes in price and are willing to buy more because of the lower price. This increase in demand more than offsets the lower price, resulting in higher total revenue for the theater. Conversely, if demand were price inelastic, a lower price would lead to a smaller increase in quantity demanded, resulting in a decrease in total revenue.

If a Decrease in the Price of Theater Tickets Increases