Price and total revenue move in the same direction when demand is
A) price elastic.
B) price inelastic.
C) unit price elastic.
D) perfectly price elastic.

Question

Quizplus · Accepted Answer

When demand is price inelastic, it means that the percentage change in quantity demanded is less than the percentage change in price. Therefore, when price increases, total revenue also increases because the decrease in quantity demanded is not enough to offset the increase in price. Conversely, when price decreases, total revenue decreases because the increase in quantity demanded does not compensate for the lower price. This is why price and total revenue move in the same direction when demand is price inelastic.

Price and Total Revenue Move in the Same Direction When