The demand for a good is price inelastic if
A)a rise in price increases total revenue.
B)a rise in price decreases total revenue.
C)an increase in income decreases total revenue.
D)an increase in income increases total revenue.
E)the good is a luxury.

Question

Quizplus · Accepted Answer

If the demand for a good is price inelastic, then a rise in price will result in a relatively small decrease in quantity demanded. As a result, total revenue (price multiplied by quantity demanded) will increase, since the increase in price outweighs the decrease in quantity demanded. Conversely, if the demand for a good is price elastic, then a rise in price will result in a relatively large decrease in quantity demanded, leading to a decrease in total revenue.

The Demand for a Good Is Price Inelastic If