Demand can be said to be inelastic when:
A) an increase in price results in a reduction in total revenue.
B) a reduction in price results in an increase in total revenue.
C) a reduction in price results in a decrease in total revenue.
D) the elasticity coefficient exceeds one.

Question

Quizplus · Accepted Answer

When demand is inelastic, it means that changes in price have little effect on the quantity demanded. Therefore, a reduction in price will not result in a significant increase in demand and will actually lead to a decrease in total revenue. Option A is incorrect because it describes elastic demand, where an increase in price would lead to a reduction in total revenue. Option B describes elasticity of demand, where a reduction in price would lead to an increase in total revenue. Option D is incorrect because an elasticity coefficient exceeding one indicates elastic demand, not inelastic demand.

Demand Can Be Said to Be Inelastic When