If a business can sell 10 units at a price of $30 but has to reduce price to $29 in order to sell 11 units,which of the following can we conclude?

Question

Quizplus · Accepted Answer

If the business has to reduce the price to increase sales, we can conclude that demand is elastic. This means that marginal revenue is positive. If the business can sell more units at a lower price, the total revenue may increase, but this does not necessarily mean that demand is inelastic. Therefore, option D is incorrect. Option A is incorrect because negative marginal revenue would mean that selling an additional unit would decrease total revenue, which is not the case here. Option B is incorrect because if marginal revenue is decreasing but still higher than price, the business would not reduce the price to increase sales.

If a Business Can Sell 10 Units at a Price