Increasing prices _____ total revenue for a product with inelastic demand and _____ total revenue for a product with elastic demand.
A) lowers; lowers
B) lowers; raises
C) raises; lowers
D) raises; raises

Question

Quizplus · Accepted Answer

For a product with inelastic demand, increasing prices raises total revenue because consumers continue to buy it despite the price increase. For a product with elastic demand, increasing prices lowers total revenue because consumers reduce their purchases or switch to alternatives.

Increasing Prices _____ Total Revenue for a Product with Inelastic