Along a linear demand curve, total revenue is maximized when demand is
A)elastic
B)inelastic
C)unit elastic
D)perfectly elastic
E)perfectly inelastic

Question

Quizplus · Accepted Answer

Total revenue is maximized at the point of unit elastic demand because a small increase in price does not significantly decrease the quantity demanded, and a small decrease in price does not significantly increase the quantity demanded. Beyond this point, a price increase will result in a more than proportionate decrease in quantity demanded, leading to a decrease in total revenue, and a price decrease will result in a more than proportionate increase in quantity demanded, also leading to a decrease in total revenue.

Along a Linear Demand Curve, Total Revenue Is Maximized When