Demand for a good is inelastic if:
A) total revenue decreases when price increases.
B) the quantity effect outweighs the price effect of a price increase.
C) the absolute value of price elasticity is greater than 1.
D) total revenue increases when price increases.

Question

Quizplus · Accepted Answer

Inelastic demand means that consumers are not very responsive to changes in price. Thus, when the price of the good increases, total revenue (price times quantity sold) will increase because the increase in price will not significantly reduce the quantity demanded. On the other hand, if demand is elastic, consumers are very responsive to changes in price, and total revenue will decrease when price increases because the decrease in quantity demanded will more than offset the increase in price.

Demand for a Good Is Inelastic If