If a demand curve displays unitary elasticity, an upward shift in the supply curve will:
A)raise total revenue.
B)lower total revenue.
C)have no effect on total revenue.
D)have an indeterminant effect on total revenue.

Question

Quizplus · Accepted Answer

A demand curve with unitary elasticity means that a change in price will result in an equal percentage change in quantity demanded. Therefore, an upward shift in the supply curve will result in a corresponding decrease in price, and an increase in quantity demanded that is equal in percentage terms. This will leave total revenue unchanged.

If a Demand Curve Displays Unitary Elasticity, an Upward Shift