The total-revenue test for elasticity
A)is equally applicable to both demand and supply.
B)does not apply to demand, because price and quantity are inversely related.
C)does not apply to supply, because price and total revenue have a positive correlation.
D)applies to the short-run supply curve but not to the long-run supply curve.

Question

Quizplus · Accepted Answer

The total-revenue test for elasticity primarily applies to demand, not supply, because it is based on the relationship between price changes and total revenue changes, which is directly related to how quantity demanded responds to price changes. In the case of supply, price and total revenue typically have a positive correlation, meaning as price increases, suppliers are willing to supply more, thus increasing total revenue, which does not provide a clear test for elasticity in the same way it does for demand.

The Total-Revenue Test for Elasticity