If a firm raises the price of its product, its total revenue will
A)always increase
B)increase only if demand is price inelastic
C)increase only if demand is price elastic
D)remain constant, regardless of price elasticity of demand
E)never increase

Question

Quizplus · Accepted Answer

If demand for the product is price inelastic, the percentage change in quantity demanded will be less than the percentage change in price, leading to an increase in total revenue. However, if demand is price elastic, the increase in price will lead to a larger percentage decrease in quantity demanded, resulting in a decrease in total revenue. Therefore, the correct answer is B, which states that total revenue will increase only if demand is price inelastic.

If a Firm Raises the Price of Its Product, Its