-In the figure above, when the price falls from $8 to $7, total revenue
A) increases from $120 to $210 so demand is inelastic.
B) decreases from $210 to $120 so demand is inelastic.
C) increases from $120 to $210 so demand is elastic.
D) decreases from $210 to $120 so demand is elastic.
E) increases from $120 to $210, but more information is needed to determine whether demand is elastic, inelastic or unit elastic.

Question

-In the figure above, when the price falls from $8 to $7, total revenue
A) increases from $120 to $210 so demand is inelastic. 
B) decreases from $210 to $120 so demand is inelastic. 
C) increases from $120 to $210 so demand is elastic. 
D) decreases from $210 to $120 so demand is elastic. 
E) increases from $120 to $210, but more information is needed to determine whether demand is elastic, inelastic or unit elastic.

Quizplus · Accepted Answer

When total revenue increases as the price decreases, it indicates that the quantity demanded increased by a proportion greater than the decrease in price, which is a characteristic of elastic demand.

-In the Figure Above, When the Price Falls from $8