All else equal, if a firm raises its price by 20 percent and the firm's total revenue falls by 20 percent,
A) demand must be elastic.
B) demand must be inelastic.
C) demand must be unit elastic.
D) the price elasticity of demand must be equal to 1.

Question

Quizplus · Accepted Answer

When a firm raises its price and total revenue falls, it indicates that the percentage change in quantity demanded is greater than the percentage change in price, which is characteristic of elastic demand.

All Else Equal, If a Firm Raises Its Price by 20