Suppose that the elasticity of demand for a product is 0.5. What will happen to total revenue as a firm increases the price?
A)Total revenue will increase.
B)Total revenue will decrease.
C)Total revenue will stay the same.
D)Cannot be determined from the information provided.

Question

Quizplus · Accepted Answer

When the elasticity of demand is less than 1 (inelastic), an increase in price leads to an increase in total revenue because the percentage decrease in quantity demanded is less than the percentage increase in price.

Suppose That the Elasticity of Demand for a Product Is