When the demand curve for a good is unit elastic, raising the price of the good by 25 percent will raise the revenue of the firm by:
A) 125 percent.
B) 100 percent.
C) 25 percent.
D) There is not enough information to answer the question.

Question

Quizplus · Accepted Answer

If the demand curve for a good is unit elastic, it means that the percentage change in quantity demanded is equal to the percentage change in price. In other words, if the firm raises the price of the good by 25 percent, the quantity demanded will decrease by 25 percent, resulting in no change in total revenue. Therefore, raising the price of the good by 25 percent will only increase the revenue of the firm by 25 percent.

When the Demand Curve for a Good Is Unit Elastic