Consider a good with a price elasticity equal to 1 at every point on its demand curve.Which of the following statements is correct?
A)Total revenue always rises exactly in proportion to a drop in the price.
B)Total revenue always rises exactly in proportion to a rise in the price.
C)Total revenue does not change if the price changes.
D)Total revenue drops to zero whenever the price rises.
E)Total revenue always doubles if the price drops.

Question

Quizplus · Accepted Answer

If a good has a price elasticity of 1 at every point on its demand curve, then a change in price will cause an equal and opposite change in quantity demanded, leaving total revenue unchanged. This is because the percentage change in quantity demanded will be equal to the percentage change in price, resulting in a constant total revenue. Therefore, option C is correct.

Consider a Good with a Price Elasticity Equal to 1