When the own price elasticity of good X is -3.5 then total revenue can be increased by
A)increasing the price.
B)decreasing the quantity supplied.
C)decreasing the price.
D)neither increase price, decrease price nor decrease quantity supplied.

Question

Quizplus · Accepted Answer

When the own price elasticity of a good is greater than 1 in absolute value (as with a value of -3.5), demand is considered to be elastic. This means that as price decreases, quantity demanded increases by a greater proportion. Therefore, decreasing the price will lead to an increase in total revenue. Conversely, increasing the price will lead to a decrease in total revenue. Decreasing the quantity supplied is not a factor that affects total revenue in this scenario.

When the Own Price Elasticity of Good X Is -3