Holding all other forces constant,if increasing the price of a good leads to an increase 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 an increase in price leads to an increase in total revenue, it means that the percentage increase in price is more than the percentage decrease in quantity demanded. This happens when the demand for the good is inelastic. If demand is unit elastic or elastic, the increase in price would lead to a decrease in total revenue. Choice D is incorrect as the assumption that a price increase always leads to an increase in total revenue is false.

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