Total revenue decreases if price increases and demand is inelastic.

Question

Quizplus · Accepted Answer

If demand is inelastic, total revenue may not decrease if price increases. Inelastic demand means that consumers are not very responsive to changes in price, so if the price increases, the decrease in quantity demanded may not be significant enough to offset the increase in price and total revenue may still increase. However, if demand is elastic, total revenue will decrease if price increases because consumers will significantly reduce their quantity demanded in response to the higher price, outweighing any gains from the higher price.

Total Revenue Decreases If Price Increases and Demand Is Inelastic