If supply decreases and total revenue in an industry increases,
A)demand elasticity must be equal to 1.
B)demand must be horizontal.
C)demand elasticity must be greater than 1.
D)we have a perfectly implausible situation.
E)demand elasticity must be less than 1.

Question

Quizplus · Accepted Answer

When supply decreases and total revenue increases, it indicates that the demand is inelastic (elasticity less than 1), as consumers are not significantly reducing their quantity demanded despite the price increase.

If Supply Decreases and Total Revenue in an Industry Increases