Which of the following is correct?
A)If the demand for a product is inelastic, a change in price will cause total revenue to change in the opposite direction.
B)If the demand for a product is inelastic, a change in price will cause total revenue to change in the same direction.
C)If the demand for a product is inelastic, a change in price may cause total revenue to change in either the opposite or the same direction.
D)The price elasticity coefficient applies to demand, but not to supply.

Question

Quizplus · Accepted Answer

When demand is inelastic, a price increase leads to a less-than-proportional decrease in quantity demanded, thus total revenue (price x quantity) increases, and vice versa for a price decrease. This means total revenue changes in the same direction as the price change.

Which of the Following Is Correct