If demand is price inelastic and the price is lowered, which of the following occurs?
A) The total revenue of the firms selling the product is unchanged.
B) The total expenditure increases and the total revenue decreases.
C) The total expenditure decreases and the total revenue increases.
D) The total revenue of the firms selling the product decreases.
E) The quantity sold decreases.

Question

Quizplus · Accepted Answer

If demand is price inelastic, a decrease in price will lead to a relatively small increase in the quantity demanded. As a result, the total revenue of the firms selling the product will decrease because the increase in quantity sold will not be enough to offset the decrease in price.

If Demand Is Price Inelastic and the Price Is Lowered