If the demand for a good is inelastic, then:
A) revenues increase when the price goes up.
B) revenues decrease when the price goes up.
C) any change in price is matched by an equal and opposite percentage change in quantity, so revenues stay the same.
D) revenues decrease regardless of the direction of the price change.

Question

Quizplus · Accepted Answer

Inelastic demand means that a change in price will result in a smaller percentage change in the quantity demanded. Therefore, if the price goes up, the quantity demanded will decrease by a smaller percentage, resulting in an overall increase in revenues. If the price goes down, the quantity demanded will increase by a smaller percentage, resulting in an overall decrease in revenues.

If the Demand for a Good Is Inelastic, Then