If an increase in the price of cotton increases total revenue,then the price effect is _____ the quantity effect.
A)equal to
B)stronger than
C)weaker than
D)not comparable to

Question

Quizplus · Accepted Answer

The price effect is the impact of the higher price on each unit sold, meaning that with a higher price, each unit sold will contribute more to total revenue. On the other hand, the quantity effect is the decrease in the number of units sold due to the higher price.

If the price effect is stronger than the quantity effect, this means that the increase in revenue due to the higher price per unit sold exceeds the loss in revenue caused by the lower number of units sold. As a result, total revenue increases. Therefore, the correct answer is B - the price effect is stronger than the quantity effect.

If an Increase in the Price of Cotton Increases Total