Holding all other forces constant,if raising the price of a good leads to a fall in total revenue,then the demand for the good must be
A)unit elastic.
B)inelastic.
C)elastic.
D)None of the above is correct, since a price increase always leads to an increase in total revenue.

Question

Quizplus · Accepted Answer

If raising the price of a good leads to a fall in total revenue, it suggests that the demand for the good is sensitive to price changes. This is characteristic of an elastic demand, where a small change in price leads to a larger change in quantity demanded, resulting in a decrease in total revenue. In contrast, an inelastic demand would mean that a change in price has a limited impact on quantity demanded and total revenue, while a unit elastic demand would result in a proportional change in price and quantity demanded, leaving total revenue unchanged. Option D is incorrect as it assumes that total revenue always increases with a price increase, which is not necessarily true.

Holding All Other Forces Constant,if Raising the Price of a Good