Suppose the price of a good is $5 and quantity demanded is 10 units. When price increases to $6, quantity demanded decreases to 9 units. What happened to total revenue and what does this indicate?
A) Total revenue decreased from $54 to $50, indicating that demand is inelastic.
B) Total revenue decreased from $54 to $50, indicating that demand is elastic.
C) Total revenue increased from $50 to $54, indicating that demand is inelastic.
D) Total revenue increased from $50 to $54, indicating that demand is elastic.

Question

Quizplus · Accepted Answer

Total revenue initially is $5 * 10 = $50. After the price increase, total revenue is $6 * 9 = $54. The increase in total revenue despite a price increase indicates that demand is inelastic, as consumers' quantity demanded does not decrease proportionally to the price increase.

Suppose the Price of a Good Is $5 and Quantity