If the demand for a good is price-elastic,an increase in price will:
A)lead to a fall in quantity demanded but an increase in the firm's revenue.
B)not affect the total revenue of the firm.
C)lead to a fall in the firm's revenue but an increase in quantity demanded.
D)lead to an increase in quantity demanded.
E)decrease the firm's revenue by the same percentage as the increase in price.

Question

Quizplus · Accepted Answer

When the demand for a good is price-elastic, an increase in price will cause consumers to decrease the quantity demanded. However, the decrease in price is proportionately greater than the increase in price, resulting in a decrease in the firm's revenue. In other words, the increase in price leads to a larger decrease in demand, which results in a decrease in total revenue. However, the decrease in revenue may not be as significant as the decrease in quantity demanded, resulting in an increase in the firm's revenue.

If the Demand for a Good Is Price-Elastic,an Increase in Price